JAN 13 INDEX UPDATE
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Short-term technical readings:
DOW - oversold region
SPX - upper midrange
OEX - midrange
NAZ - overbought region
NDX - overbought region
VIX - 28.66, lower midrange(inverse to market)
CBOE PUT:CALL RATIO - .60(neutral territory)
5-DAY TRIN - 5.20(neutral territory)
Per my short-term technicals, the hints continue of sector rotation from the DOW into the NAZ. The DOW did give an intraday CLASS 2 BUY and the NAZ/NDX did give intraday CLASS 1 BUYs. So what happens next with the DOW and NAZ at opposite ends(which is an anomoly).
Will the DOW rise and NAZ drop and meet somewhere in the middle or will we get EXTREME SECTOR ROTATION where the DOW continues down and money flows in the NAZ keeping the NAZ in the overbought region for an extended period. I dont know, but I did not short the NAZ/NDX, nor would I be long the DOW, just in case. Not making a prediction, just being cautious.
Although the DOW and NAZ are at opposites per my short-term technicals, the SPX/OEX are in the middle. The PUT:CALL RATIO and the 5-DAY TRIN and the VIX(to a lesser degree) are supporting the belief that the overall market is really in the midrange.
Although the NAZ/NDX did close slightly down, on the intraday basis they were up and the NAZ slightly pierced the DOWNSIDE TRENDLINE from the SEPT PEAK to the upside, but closed below it. Would like to have better confirmation of yesterdays HIGHER HIGHs in the NAZ/NDX, but we need to keep in mind that the NAZ/NDX has rallied over 400 points(NDX low at 2087) so a pause here is not unreasonable. The main issue is that HIGHER HIGHs were produce(would like some more confirmation) which was the 1st complete cycle of a HIGHER LOW and HIGHER HIGH in many months. It implies that for the interim, the trend has changed - how long will that interim be? Thats a question we need to find clues for.
The NAZ/NDX did give INTRADAY CLASS 1 SELL signals, but as I have mentioned often, INTRADAY signals are not as reliable as CLOSING signals. Regardless the NAZ/NDX did give a hint that some sort of a reversal may have started since it gave up all and a little more of their intraday gains. They also formed DOJI's, which is common at short term tops after a significant run. DOJI's are only a 1-DAY signal, so it requires confirmation.
Since next week is expiration week, the MAX-PAIN may have some effect:
Here are the MAX-PAINs for the QQQ/OEX/DJX per iqauto.com
QQQ - MAX-PAIN=60, closed at 62.73
OEX - MAX-PAIN=685, closed at 687.9
DJX - MAX-PAIN=106, closed at 105.25
Since the indicies are near their MAX-PAIN levels, Im more inclined to say that next week may be basicly FLAT, with oscillations - no strong buying and no strong selling.
In my personal mutual fund account I closed all unhedged UOPIX(long-NDX) positions, but did establish a equal HEDGE with the USPIX/UOPIX, and am about 75% cash. Although I did get intraday CLASS 1 SELL signals, I decided not to go short the NAZ/NDX in light of possible SECTOR ROTATION; therefore the HEDGE POSITION. In my trading account close all long positions except for one.
Seeya |
