Market Direction and Stock Trends

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Peek Into Future Through Futures

* January 14, 2017

Following futures positions of non-commercials are as of January 10, 2017.

E-mini S&P 500: From November 9 through this Wednesday, $18.6 billion moved into SPY, the SPDR S&P 500 ETF. That is after accounting for the $4.5 billion in withdrawals in the week ended this Wednesday. This week’s redemptions more than took care of the $3.7 billion in inflows in the prior two (courtesy of ETF.com).

The cash is up 6.3 percent post-election, but has done nothing for five weeks now. Thursday – as well as the week – produced a dragonfly doji. This can potentially be a sign that the bulls are struggling to maintain the uptrend.

At this juncture, outflows do not help. That said, in the week ended Wednesday, $2.4 billion moved into U.S.-based equity funds – $22.9 billion post-election (courtesy of Lipper).

The longer the sideways action in the cash continues – let alone decline – the higher the odds this money grows restless.

Currently net long 21.4k, down 60k.



Nasdaq 100 index (mini): Through Wednesday, the cash logged seven straight sessions of gains. Year-to-date, it is up four percent, and has not only recaptured 4900, but has managed to also carve out near-term support at 4960.

Flows cooperated. In the week ended Wednesday, QQQ, the PowerShares Nasdaq 100 ETF, pulled in $642 million (courtesy of ETF.com).

Interestingly, shorts probably sensed an impending rally, thus covered in the December 16-30 period. QQQ short interest dropped 16.3 percent to 41.2 million shares. Also, Nasdaq short interest dropped 1.5 percent even as the composite fell 1.4 percent. Nasdaq short interest is now at the lowest since the end of January 2014. Since the middle of February last year, short interest fell nearly 15 percent, which provided a major boost to the index. That tailwind is less potent now.

Currently net long 81.7k, up 8k.



Russell 2000 mini-index: Since the cash peaked on December 9 at 1392.71, it had been making lower highs, with support at 1350-plus. Come Thursday, that support was lost intra-day, but recaptured by close. Bulls stepped up to defend month-and-a-half support at 1347.

Small-caps have had a massive rally particularly post-election, and have tons of unwinding left in the right circumstances.

Non-commercials, who are heavily net long, are vulnerable. The cash has essentially gone sideways for five weeks now. If and when their patience breaks and decide to unload their holdings, bears will lick their chops.

In the meantime, in the week ended Wednesday, $60 million left IWM, the iShares Russell 2000 ETF. In the prior four weeks, it took in $1.7 billion (courtesy of ETF.com).

Currently net long 82.4k, down 10.2k.



US Dollar Index: On Wednesday, when President-elect Donald Trump held his first post-win press conference, the cash had a wild session, ranging from 101.24 to 102.96 before closing on 101.75. Shorter-term moving averages had already been lost.

The 50-day moving average (101.11) was tested on Thursday and Friday. This area also approximates the highs of 100.71 and 100.60 of March and November 2015, which the dollar index broke out of last November. So the average likely holds near-term.

That said, there are tons of weekly overbought conditions remaining to be unwound.

Currently net long 53.1k, down 1.1k.



VIX: On the cash, 10- and 20-day moving averages have converged. In three of the first four sessions this week, they resisted rally attempts, with VIX closing below 12 in all four. On Friday, it dipped below 11 intra-day. This week’s action followed unsuccessful attempts last week to take out both 50- and 200-day, which are two to three points higher.

The VIX-to-VXV ratio has now been in the high .70s in six of the last eight weeks, with the other two in the mid-.80s. The rubber band is stretched.

Currently net short 126.2k, up 21.6k.



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