September 13

Market Update for Thu 14 Sep 2017

Equities extended their winning streak on Tuesday. European equity indices closing broadly higher again and many closed near multi-week highs. Concerns over the recent hurricanes in the USA diminished, adding fuel to the risk-on sentiment. Furthermore, investors appear to have breathed a sigh of relief after the UN Security Council passed a toughening of sanctions against North Korea that did not include an embargo on oil or a freezing of assets of North Korean leader Kim Jong-un.

XJO extended its winning streak as well and rallied 30+ points at the open. Already weak demand dried up below the familiar short-term resistance level at 5780 and prices recoiled. All initial gains were given back into the close. Demand remains below-average and the close at the low of the day is weak. The lack of demand remains a concern while prices prove time and again their unwillingness to go lower. This keeps prices trapped in their 2017 trading range between 5665/80 and 5805 with its key pivotal level at 5740. And 5740 is where prices are at, in no-mans-land, so to speak. So far the price index failed to close above 5765 which would turn the downtrend into a confirmed uptrend and therefore Market Condition remains in Stage 2.

The NH-NL Index remains positive. We discussed in previous reports that Daily NH-NL indices are improving which show underlying strength building. We view a break above the previous level of resistance as a change of character. In previous instances, Daily NH-NL indices recoiled from this level. This is why a break above would give an initiation signal and therefore keep the door open for higher prices ahead. The Weekly NH-NL index continues to grind up at its highest level in four months. This is a simple message for conductive markets.

The Secondary Market Internals are positive. The NH-NL Ratio is at a healthy level above its 50% neutral line and its moving average is rising. A rising moving average is another message for conductive markets. The Volatility Index remains flat.

The Breadth Indicator remains neutral. The McClellan Oscillator remains flat around its zero line but respecting its rising bottoms line (green line) thus far. The Summation Index remains flat at a comfortable level above its +600 neutral line.

The Bottom Line. An initial rally met supply at a previous level of resistance. Low volume denotes weak demand which keeps prices trapped in their 2017 trading range between 5665/80 and 5805. Market Internals remain positive and for as long as prices can remain above the 5700 handle, we can’t categorically rule out further gains. However, today’s price action and the consistently low volume remains a worry. Therefore, expect more lateral movement before the struggle of leadership between bulls and bears can be resolved. Trading Mode remains Conservative. A close above 5765 would be required for an upgrade to Aggressive.

This was our last Market Update for the next two weeks. The next Market Update will be published on Wed 27 September 2017.
Thank you for your understanding and continuous support.