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A close and hold below last year's low of 1949.46 could spell more trouble ahead for China's Shanghai Index, especially if the moving averages cross over again to form another bearish "Death Cross." There's no positive divergence and no indication of a reversal yet on the RSI, MACD, and Stochastics indicators to suggest that a bounce is imminent.
 
China's Shanghai Index Near 3-Year Lows ...
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This week's update will simply show percentage gained/lost graphs of World Market action for the week.

You can see that, with the exception of Japan's Nikkei, the U.S. $, and Lumber, they all declined. What I like about this graph format is the fact that we can see, at a glance, where money flow has been directed this past week in various world markets, and to see the "outliers"...that is, which markets gained or lost the most amount compared to the others...ones to watch going forward to see if they continue leading in strength or weakness and what effect they may have on other instruments (e.g., Greece, Japan, Homebuilders, Metals, the BRIC countries, the U.S. $, and Bonds), as well as the TNX:SPX ratio.

Inasmuch as next week is full of economic data, is the end of the month, is the end of Q2 for 2013, will see nine FOMC members speak at various venues, and will see Fed POMO activity on all five days, I wouldn't be surprised to see intraday and overnight volatility increase as market participants attempt to interpret, what will likely be, conflicting information, data, and viewpoints, not to mention reaction to further domestic and foreign news at it unfolds. As such, we could see choppy, non-directional trading with large, volatile swings dominating...it should be an "interesting" week.

Money Flow for June Week 3
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This week's update will look at:

  • 6 Major Indices
  • 9 Major Sectors
  • SPX:VIX Ratio
6 Major Indices
 
As shown on the Weekly charts and the percentage gained/lost graph below of the Major Indices, all of them erased gains from last week's close and ended lower. The largest losses were made in the Nasdaq 100, followed by the Dow 30, S&P 500, Russell 2000, Dow Transports, and Dow Utilities.
 
As I mentioned in my last weekly update, and is still the case, price remains elevated, overcrowded, and overbought in all of them (see Stochastics indicator) on, not only their Weekly timeframe, but also their Monthly and Monthly Options Expiration timeframes. The one exception (on a Weekly timeframe only) is the Dow Utilities, which, so far, has held the 50 week moving average...it's still overbought on the other two timeframes.
 
Money Flow for June Week 2

 

Money Flow for June Week 2
 

9 Major Sectors

 
As shown on the Weekly charts and the percentage gained/lost graph of the Major Sectors, six of them erased gains made from the previous week. Financials was the biggest loser, followed by Energy, Industrials, Technology, Cyclicals, and Materials. The "defensive" sectors were flat on the week.
 
The above comments are also applicable to these Sectors with respect to elevated price and overbought territory on the same three timeframes.
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This week's update will look at:

  • 6 Major Indices
  • 9 Major Sectors
  • SPX:VIX Ratio
  • SPLV vs. SPX vs. CRX
  • Various World Markets
  • Stocks Above 20/50/200-Day Moving Averages

6 Major Indices

 
As shown on the Weekly charts and the percentage gained/lost graph below of the Major Indices, all of them erased losses from the first half of the week and ended higher. The largest gains were made in the Dow Utilities, while the smallest gains were made in the Nadsaq 100.
 
You can see that price remains elevated near their Weekly upper Bollinger Band and in overbought territory according to their Weekly Stochastics in all of them, except the Dow Utilities, which found interim support at its 50 week moving average.
 
As I mentioned in my last weekly market update, price was elevated on, not only the Weekly timeframe, but also the Monthly and Monthly Options Expiration timeframes. Price remains overcrowded and overbought at current levels on these three timeframes, in spite of the brief pullback they experienced earlier in the week on a Daily timeframe. I wouldn't be surprised to see a further downdraft in these Indices and increased volatility remain a factor in intraday moves in the near-term, particularly leading up to the next Fed meeting and Chairman's press conference on June 19th and the monthly and quarterly June Options Expiration on the 21st.
 
Money Flow for June Week 1

 

Money Flow for June Week 1
 

9 Major Sectors

 
As shown on the Weekly charts and the percentage gained/lost graph of the Major Sectors, the largest gains were made in Consumer Staples and seven others, while Materials lost a minor amount on the week.
 
The above comments are also applicable to these Sectors with respect to elevated price and overbought territory on the same three timeframes. 
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This week's update will look at:

  • 6 Major Indices
  • 9 Major Sectors
  • SPLV vs. SPX vs. CRX
  • SPX:VIX Ratio
  • Q2 Targets (channel update)

6 Major Indices

 
As shown on the Weekly charts and the percentage gained/lost graph below of the Major Indices, this past week saw further profit-taking in five out of six indices, adding to last week's losses. The largest losses occurred in the Dow Utilities, while the Nasdaq 100 lost the least, and the Russell 2000 was flat on the week.
 
Money Flow for May Week 5

 

Money Flow for May Week 5
 
Since Friday closed out the month of May, I'm also posting the following Monthly charts and the percentage gained/lost graph for May. While the Russell 2000 gained the most in May, the Dow Transports gained the least, and the Dow Utilities lost 10.27%.
 
As I mentioned in my last weekly market update, the profit-taking that we've seen over the past two weeks is hardly surprising, given the highly elevated stance of prices relative to their Stochastics cycle and Bollinger Bands on, not only a weekly basis, but also on a monthly Options Expiration timeframe (as I had outlined in my update two weeks ago), as well as on a Monthly timeframe, as seen in these charts.
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This Daily comparison chart of the SPLV (which is an ETF containing the top 100 lowest-volatility stocks in the S&P 500 Index) with the SPX  shows that they have traded pretty much in tandem since the ETF's inception.

However, that correlation diverged in mid-May and the SPLV has now made a lower closing swing low on this timeframe. Furthermore, the Momentum indicator has dropped below the zero level signalling potential further weakness ahead.

We'll see if the SPX follows and pulls back on any further SPLV weakness.

SPLV vs. SPX vs. CRX
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This week's update will look at:

  • 6 Major Indices
  • 9 Major Sectors
  • Various World Markets

6 Major Indices

 
As shown on the Weekly charts and the percentage gained/lost graph below of the Major Indices, this past week saw profit-taking in all of them, with the greatest losses occurring in the Dow Utilities.
 
This small drop on the week, percentage-wise, is hardly surprising, given the highly elevated stance of prices relative to their Stochastics cycle and Bollinger Bands on, not only a weekly timeframe, but also on a monthly Options Expiration timeframe, as I outlined in my last weekly market update.
 
It will take a more substantial pullback to relieve these over-extended conditions...whether we see that next week remains to be seen.
 
Money Flow for May Week 4

 

Money Flow for May Week 4
 

9 Major Sectors

 
As shown on the Weekly charts and the percentage gained/lost graph below of the Major Sectors, this week saw the largest percentage drop in Utilities. Health Care was flat.
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I showed a 3-year comparison of price action on the SPX to the Commodities Index (CRX) in my post of April 5th.
In it, I mentioned the correlation between the two and the instances where, mainly, the CRX would lead an ultimate drop in equities, by putting in negative price divergence before the SPX.

The following chart shows that, since the time of my post, the CRX has put in another lower swing low and has not yet made a higher swing high in its present (large) negative divergence that begins from February of this year, while the SPX has continued its meteoric climb.
If commodities continue their weakness and equities do not follow suit, I will wonder what has changed since February to cause this disconnect between the two.

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The argument that I've heard repeated ad nauseam as a reason why stocks should simply go up "until the Fed takes the punch bowl away" (even at current market all-time highs) has been, "It's different this time." I even heard a comparison today that we're in a market environment like the mid-90s.

I'd just take a minute to remind traders that Baby Boomers, who were heavily into acquiring all kinds of assets/products/services/loans for themselves and their growing children/teenagers in the 90s, are now facing retirement and are no longer "spending like there's no tomorrow" on the same kind of stuff. 

Read more...

This week's update will look at:

  • 6 Major Indices
  • 9 Major Sectors
  • Various World Markets

 

6 Major Indices

 
As shown on the Weekly charts and the percentage gained/lost graph below of the Major Indices, the largest gains were made in the Dow Transports, followed by the Russell 2000, S&P 500, Nasdaq 100, Dow 30, and Dow Utilities.
 
On a weekly basis, these indices remain in a highly elevated stance relative to their Stochastics cycle, and, with the exception of Utilities, they closed the week at or above their upper Bollinger Band.
 
The same can be said when one looks at a timeframe in which each candle represents a one-month Options Expiry period (the current candle closed on Friday), as is shown on the next charts...with one difference...Utilities closed at its upper Bollinger Band after pulling back from its prior close above at the end of the last options expiration period.
 
If one is just going long here, be aware that you are doing so, not only at the upper end of their weekly and options expiry time cycles, but also very mature cycles, as well as at or above their upper Bollinger Bands.
 
I'd suggest that if we don't see some sort of orderly pullback from these levels, we may see a parabolic move to the upside, followed by, what could be, a swift and violent/volatile correction -- something to which I alluded in my earlier post today (Friday) relative to this week's move in the U.S. $ [and for which I was ridiculed at another site where I guest-post articles...so no, I wasn't "smoking" anything (I'm a coffee-hound and teetotaller) and I always trade with a clear head (I take my work very seriously and my analyses are not done without careful scrutiny)...the only thing that may affect my mind is age...and I can't do anything about that!]. :-)
In any event, combine the high price of the U.S. $ with the high prices of equities (all-time highs in many cases), and that makes it unattractive for new foreign investment at the moment.
 
Money Flow for May Week 3
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