Money Flow for September Week Three

By -

I'll begin this post by saying that this was a weird
week


Further to my last weekly market update, this week's update will look at
Weekly and Monthly charts and graphs for the 6 Major U.S. Indices and 9 Major
Sectors.

As can be seen from the following Weekly charts and
1-Week gains/losses graph of the 6 Major U.S. Indices
, all of them,
except the Nasdaq 100, saw profit-taking. The Dow Transports was especially hit
hard…one to watch for further evidence of weakness, possibly dragging the
others down, as well…although it's sitting at the bottom of a tight range and
could bounce from here.

The Monthly
charts and September's graph
below show that the Russell 2000 Index is
leading in terms of percentage gained, so far, for the month. It's the other
Index to keep an eye on to see if weakness enters next week, or if it maintains
its bullish leadership.

The Weekly
charts and 1-Week graph below of the
9 Major Sectors
show that profits were taken in the riskier, Offensive Sectors, while some gains
were made in Health care and Consumer Staples. The largest losses were made in
the Financials…one to watch to see if this continues.

The Monthly
charts and September's graph
below show that Materials and Energy still
lead in percentage gained, so far, for this month…ones to watch to see if this
week's downdraft continues, or if they resume their trek to finish the month
even higher next week.

Lastly, the
two Year-to-date volatility ratio charts of the SPX:VIX and
RUT:RVX
show that the SPX closed the week at short-term resistance,
while the RUT closed above. In fact, the RUT:RVX closed at an all-time high, as
shown on the third (Monthly) chart, confirming that Small Caps
lead this current market rally in the least volatile environment, for now. This
rally may not end until we see volumes become extremely frothy on the
corresponding Russell 2000 E-mini Futures Index, the
TF.

What do I
take away from all of this?
It appears that we have some Sector
rotation going on as some markets (mainly the Defensives) pushed higher at lofty
levels, and others have had some profit-taking. For the time-being, all I can
say is that, generally, overall sentiment/momentum is still favouring the upside
while volatility remains low, in spite of the conflicting data/events that I
mentioned in my opening paragraph. However, most markets remain near their highs
of this year and some people may consider them as being overbought. They are
likely, technically, correct…however, in this Fed-controlled monetary
environment, markets may not always pay attention to pure technicals, as the
Fed's actions seem to remove some of the risk in going long at these levels.
But, since markets may react to unexpected negative news events and are, no
doubt, pricing in this risk, and we may see a market that produces small daily
gains in the days/weeks ahead…it becomes a slow, griding, melt-up. Time will
tell. The challenge for me, as a daytrader, is in determining where support and,
to a lesser extent, resistance lie for the day in this kind of
environment.

Enjoy your weekend and good luck next week!