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Today's comments will be brief... The prices paid for commodities continues to hold up although the strong uptrend has paused.  The high prices being paid for commodities continues to point towards economic growth which is favorable towards equities.  However, at some point, the commodity price increases will start to indicate excessive inflation pressures, and when that happens, the strength in commodities will start to work against equities.

The chart below is borrowed from John Murphy.  The US Dollar is at a very important long-term support level, and it is starting to show signs that its steep down trend may pause or reverse, at least for a while.  This will work against commodities but may attract foreign funds to flow into US equities, which is a very favorable influence of US equities, particularly large caps. 

Uranium has been an extremely strong commodity but looks like it is consolidating its huge gains as indicated by the SAR reversal.

Energy shares have been on fire along with the rest of the market, but the price of oil remains in its recent trading range.  The energy shares formed a very nice high consolidation, with a powerful bullish breakout.  Generally the shares anticipate the commodity, so will oil prices follow the shares higher?

Below is a chart of the cumulative NYSE advance /declines that have shown unbelievable strength since last summer's lows.  Last April, this indicator showed a negative divergence with prices that hinted of the sell off that came in May.  Currently, the indicator shows a little hesitation, and the smoothed MACD is looking like it wants to roll over and head lower, but the chart indicates that the highs in price have been confirmed by the trend in advance /declines.  This has been a strong bull market for sure. 

The chart below shows a series of slightly weakening technical indicators that includes the new highs /new lows, percent above the 50-day and percent above the 200-day.  All six of the 20-day moving averages of the indicators touched their prior peaks in bullish fashion, but are now below the prior highs indicating some weakening momentum and declining participation for the NYSE and NASDAQ.

In an aging intermediate cycle of a bull market, you'd expect to see the level of new lows increasing as the market forms a topping pattern.  However, despite a mid May pick up in new lows for the NASDAQ, these numbers have looked very favorable for equities.

Below is the OBV for the NYSE and the SPX.  The volume trend for the NYSE doesn't look weak at all, and the same strength shows up in many of the major indexes.  But there are a few indexes showing the early signs of a weakening trend in volume such as the S&P 500.

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com | 

The four major durations of the yield curve are shown below.  The 10-year looks like it wants to break out above important short-term resistance, but it hasn't yet and may pause for a bit.  I believe the strength in 10Y rates points to an anticipation of US economic growth and is indicating that the 10Y and 30Y are not the place to be at the moment.  However, if there is a sell off in the equity market, money could flow back into US Treasuries which would push rates back down, at least temporarily.

The chart below shows how the 10Y rates have consolidated since last summer, testing the lows around 4.5% several times.  However, 10Y rates are currently still within the trading range.  The 3M T-Bill has broken slightly below its trading range as money may have been moving from longer to shorter durations.  The interest rate sensitive equity sector has rallied since mid March, but is lagging the market and stalled just above the prior high.  If 10Y rates do break above the trading range, this equity group is likely to continue to underperform.

Below is a longer-term view of the 10Y rates being pushed higher by a 4-year uptrend, but now just below a resistance level.

Additional overhead resistance for 10Y rates is shown in the chart below.  How the 10Y resolves the convergence of these trends in the coming weeks will tell us a lot about how to position our portfolios. 

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com | 

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com | 

This month's reported NYSE Short Interest is unchanged from last month.  It remains at its highest level in years, which indicates a very high level of investor fear of a decline in equity prices.  Investors are clearly anticipating that the market will decline and are either protecting their current positions from downside risk, or are trying to position their portfolios to profit from the decline.  The high short interest may also be partly due to the large number hedge funds that participate in 'pairs' trading in which the fund is short one company or index, and long a similar, related company or index.  It seems to me that regardless of the strategy being used, the short position represents a degree of skepticism towards the current level of equity prices.  So from a contrarian sentiment point of view, the current level of NYSE short interest is favorable towards equities.

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

Last week's bullish percents are above and this week's are below.  There was only one move this week and that was a shift higher by consumer staples.  It makes some sense to see rotation to this sector as fund managers, who are required to be invested in stocks, move to an area of the equity market they believe will be hurt the least if the market corrects lower. 

Red is a column of O's in a downtrend, blue is a column of X's in an uptrend.  Below 30% is oversold, and above 70% is overbought.  Yellow is a shift down, green is up.

Thursday's sell off was broad based on higher volume and clearly qualifies as a distribution day.  But the internals didn't indicate it was the signal that the correction has started.  It may be part of a topping process, but we'll need confirmation of that by watching how the market follows through from here.

Below is the chart of the up volume and down volume for the NYSE.  A strong distribution day next week would show downside follow through and would sound a loud alarm since the market is at such high levels. 

Thursday's sell off didn't result in a spike in new lows for either exchange, and, in fact, the new highs still exceeded new lows for both exchanges. This is a favorable sign for the equity market.

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

This weekend I'll take a look at how bad the damage was to the market as a result of yesterday's broad based sell off. 

Below is a look at investor sentiment shown in a diagram of four investor surveys.  The individuals and bloggers remain quite cautious towards the market despite the huge gains of a very powerful bull market run that began late last summer.  Their lack of bullishness has been, and continues to be, very favorable for stocks from a contrarian sentiment view point.  The newsletter survey is more important than the others because they have a greater need to be right about the market in order to keep their subscribers. So they really can't afford to be on the wrong side of the market trend.  They are currently getting close to an overbought bullish extreme reflecting the need to be in sync with a very strong stock market.  This level of bullishness is hard to assess because it is still just shy of the bullish extreme, so it is probably neutral towards equities when viewed as a contrarian sentiment indicator.

The survey information above can be obtained for free via the following sites.  Investor's Intelligence is from Market Harmonics,.  Individual Investors is from aaii.com, Market Vane is from Investment Tools and Birinyi Bloggers is from Ticker Sense.

Regarding Market Vane, this is a survey of futures commodity advisors and is used by futures traders.  The publisher states that it is best used as an indication of the current short-term trend, with the idea that investments in futures should be in line with the trend.  So this survey has to be viewed separately from the others.  For additional information about market sentiment, I recommend a blog by Brent Leonard.

Sentiment analysis is an important component when following the markets, and is considered a “contrary” indicator.  Contrary because if too many people are bearish then there aren't enough sellers left, the balance tips to buyers, and the market starts to advance.  If too many people are bullish, most funds are already invested, the balance tips to sellers and the market weakens.  One way to determine if investors are bearish or bullish is by taking surveys and tracking at what levels these polls indicate investors are at the extremes of bearish or bullish sentiment.

Keep in mind, sentiment analysis is not a science and only provides very general information.  Sentiment is not a signal to take action, but provides background about the current state of the markets.  For instance, there have been many occasions when bullishness reached high levels well before the market started to weaken.

The chart below shows a different view of the II newsletter writer's survey.  By including the writers that have a bearish stance towards the market as a ratio of bulls vs. bears, it indicates that the sentiment of writers is generally at levels that should start to work against stocks.

I like to check in with the VIX at least once a week, and right now it is working against equities.  Generally, if the market is trending higher then the VIX should be gradually trending lower.  Right now the VIX is moving higher, which is the wrong direction.  This is clearly a negative divergence.  John Murphy and Marty Chenard have expressed similar concerns.  For additional analysis, check out VIX and More.

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

The uptrend in commodity prices has paused perhaps due to some mixed influences.  The US Dollar is at a major long-term support level where it may bounce higher, and this may be working against commodities.  However, the US economy may have bottomed out and may be started to pick up a little momentum, and this may be working for commodities.

The chart below shows the heavily energy-weighted GSCI commodity index ETF below an important resistance level, but also well above the low of early January.  The price action of this ETF will help determine the trend and how commodities are reacting to the mixed impact of the US Dollar and US economic strength. 

The Yen has continued to weaken after showing a couple short periods of strength over the last year or so, while the Yen and the US Dollar have been the two punching bag weak currencies of the major world economies for a number of years.  The Yen is important because the Yen carry-trade has fueled some of the economic growth and asset price gains around the world.  So I believe an inexpensive Yen continues to work in favor of the world economy, and a stronger US Dollar attracts funds specifically to US equities.  The Yen/USD ratio at the bottom of the chart will help confirm this currency relationship.

Will gold shares show some strength now that the HUI index sits right at a long-term support line?  The index is squeezed tightly between powerful overhead resistance and the 6-year up-trend.  The RSI may offer some additional help determining this trend.  If the RSI holds above the 40-level it would be favorable for gold share prices.

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

The market is once again near to short-term overbought levels so at least a pause is expected.  The breadth figures are mixed with the new highs /new lows and bullish percents showing broad participation and underlying health.  However, some of the indicators that turn ahead of prices such as advance /declines and stocks above the 50 and 200 day averages, are showing some negative divergences with prices.

Advance /declines are not as reliable in my opinion as the new high /new low stats, but do help evaluate the market health.  No surprise here, the moving averages of the advance /declines for both exchanges have diverged negatively with prices which is a warning signal for a potential price correction.

The stats for stocks above the 50-day average and stocks above the 200-day average for the NYSE are below.  This chart also so shows a weakening non-confirmation of the price highs, but not alarming levels.  There's no doubt that the price highs are being made by fewer stocks.

The above indicators lead prices as opposed to the bullish percents.  This indicator shows healthy participation by most NYSE stocks and lagging participation by the NASDAQ, so no surprise that the NYSE has been the stronger exchange.

Last week the NASDAQ new lows were at bearish levels, but since then have settled back down to favorable levels.  Both exchanges now show very healthy new high/ new lows.

Another view of NYSE new highs /new lows is shown below.  This shows a very nice surge higher of new highs as the price index moves higher.  This is a strong stock market when measured by new highs /new lows.

Disclaimer: All charts and comments are intended for education and discussion purposes only. No investment recommendations are being offered. Please do your own research and take responsibility for all investment decisions that you make. Questions and comments related to this post are encouraged.  | MON - Sector Strength | TUE - Interest Rates | WED - Market Breadth | THU - Commodities & Currencies | FRI - Market Sentiment | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |

Below is the same old boring chart shown every week of the US Treasury durations.  All the rates are now above the 40-week, but still well within the trading range established since last fall.  We had all the durations above the 40-week just last Feb, but then the equity market sold off big time and investors sought refuge in Treasuries, and down the rates went again.  But rates never went below the prior lows, and now rates are header higher once more.  Nothing conclusive is shown in this chart though.

The chart below shows T-Bill rates dropping and 10-Year note rates rising.  It appears that money is flowing into the short-term instrument for now, and away from the longer-term.  This seems like a normal rotation for a somewhat weak economy showing the early signs of renewed growth.  Notice that the yield curve has now steepened and is no longer inverted, another good sign for the economy.  We just don't want longer-term rates to move too high and too fast.  Otherwise, these are generally reasonable developments.

Another factor in support of the notion of higher longer-term rates ahead (along with a steepened yield curve) is shown in the weekly chart below.  10-Year rates are crawling along the multi-year uptrend support line, while short-term rates are being turned back by overhead resistance.

Just when we thought we had this uptrend in 10-year rates nailed, the monthly chart below pops up to add more mystery to the future of rates.  This chart below shows a very long-term 17-year downtrend in 10-year note rates about to collide with the shorter 4-year uptrend shown the chart above.  A showdown is ahead and one trend line is going to get broken.

Speaking of long-term trends... the US Dollar has been weak for almost all of our investing lives.  Now, here it is again at a multi-decade low, but this is where foreign investors might spot the Dollar as a bargain, particularly if economic growth is accelerating in the US.  The RSI hints the declines have been losing some momentum.