The Emini closed down 11.00 points at 1,416.50 on Friday. Once in a while my views on the direction of the market differ widely from most of the commentaries I try not to read. That was the case again after the close on Friday and over the weekend. First post of the New Year and 3 charts to review.
Friday's market action first
The Emini opened down 3.50 points at 1424.00 on Friday. The market immediately started to sink but by lunchtime had put in a high volume bar with a low of 1414.25 and then traded sideways for the rest of the day. The Emini eventually closed at 1416.50. Range for the day was average at 10.00 points and volume just above average at 1.1 million contracts traded.
TRIN indicator divergence
The first chart shows Trading Index (TRIN) market divergence. I adjust Trading Index data so it's easier to interpret and the indicator is shown below the daily bar charts of the Emini. When the adjusted Trading Index is positive but the market closes down, this is positive divergence and shown by red dots on the daily bars. Vice versa for negative divergence and white dots on daily bars. This shows that although Friday was a down close day the volume traded was buying volume.
Stopping volume pattern
The second chart shows my stopping volume pattern. If the market makes a new low on higher volume than the previous day but the daily range was LESS than the previous day, this shows buying volume is coming into the market and preventing it falling further. Conversely if the market makes new highs on higher volume but smaller range this shows selling volume coming in. The pattern is shown on the chart automatically and plotted below the daily bars when bullish and above the daily bars when bearish (I love what you can do with TradeStation Easy Language).
Trend Line support
The third chart shows trend lines automatically plotted on the daily Emini bars. As you can see we recently broke a trend line connecting the last 2 pivot points (strength 4). However, Friday's low was almost exactly on the previous rising trend line that is formed from the low points on 11 October, 3 November and 28 November.
The charts above illustrate 3 reasons to be bullish about the Emini market, but they're not the only ones. In addition we have:
- Lower oil prices
- NASDAQ performing stronger than the Dow
- Large volume spike on Dow with little follow through to downside (buying volume)
- My trend indicators in the buy zone, but not strongly over-sold
- Cycle support on daily and 135 minute time frames
- Bearish media commentaries
On the bullish side we have weak bond market, seasonality and Commitment of Traders data. (Note: Release of latest Commitment of Traders data delayed from Friday to Monday.)