The Markets: Close to the Edge ...
Today's charts will look at what is happening to:
1. The "Core Holdings" held by Institutional Investors.
2. The NYA Index vs. its Long Term Relative Strength ... and,
3. The Inflowing/Outflowing amount of Liquidity in the market vs. rallies and corrections.
1. First, we will look at what is happening to our Institutional Index. Its candlestick chart is below and it is at the apex of its triangle. This is where it should breakout and pick a direction today.
2. This is next chart is a pretty simple, but graphic chart. The green indicator line measures the 30 RSI on the New York Stock Exchange. What is important to note, are the times the RSI went below the 50 RSI level. They are all times that the market pulled back ... times to avoid investing on the long side until the RSI's negativity was over and back up over the RSI 50 level.
Where are we now? Still negative and at about an RSI of 46. Note the movement of the RSI since it first went negative in early November. It has consistently made lower tops and lower bottoms, which means the Relative Strength has been in a down trend.
That condition has not ended yet, even though the RSI has been moving up, because the RSI is still in a down trend and still below its resistance line. What to watch now: The RSI is moving up and is about to test its resistance line. If it makes it above that, then its next hurdle is in moving above a Relative Strength level of 50. A failure to rise above the resistance would be a negative saying that investors are not yet ready to show any important level of confidence. This will be an important test for the market.
3. Interestingly, the amount of Liquidity flowing into the market went into Contraction in early January. Liquidity Contractions are always associated with market pullbacks or corrections.
What is interesting, is that inflowing liquidity is still in Contraction ... but it is also at the point of testing its resistance line. If it can break to the upside, then the momentum of increasing, inflowing liquidity could give the NYA's Relative Strength the boost it needs to break through its resistance.
What is clear, is that the market is indecisive and has not yet made the decision of which direction to go in now. We are now approaching an important point where the Bulls and Bears will have a "face off" to see who is the strongest. See the next question ...
(Today's two charts are from our (paid) Subscriber sites.)
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