The ARCA Institutional Index
We like to monitor institutional sentiment using various methods, one of which focuses on The ARCA Institutional Index (XII). This index tracks the 75 most commonly held big cap stocks that institutions typically have in their “core portfolios”.
Price action remains below the 9/20ema, having recently punched below Bollinger bands when yields popped unexpectedly. That first red Elder bar, has been followed by alternating red and blue bars, over the past eight (8) trading days. We closed yesterday at the lows of the Tuesday session.
Bearish Scenario
If the index cannot make it back above the short term moving averages, there is a possibility that July, August, September marked the top of a head and shoulders pattern. The 200ma is in the vicinity of a probable neckline.
Price continues to find resistance at the overhead moving averages. Stochastic is pointing South and MACD is already below the zero line.
Sector catalysts are few, with healthcare and biotech/pharma stock(s) recent strength, adding to or clouding the overall picture.
Bullish Scenario
Extending a trend line from the February lows provides some context. Price action is making higher lows, for the time being. If the index turns higher and continues on its upward path, MACD and stochastic will follow in the short term. A 2% push would bring XII back to 2016 highs.
In addition, RSI is in a position (< 50) where it could support a thesis for bullish continuation, should it start tracking higher. A push through 50 would be bullish.
Another possibility might be a test of the ascending trend line, over the next few days/weeks. That would be an opportune location to begin legging back into long term bullish equity funds. 401(k).
As you might have gathered, we are flat in our 401(k). We would like to see lower prices before legging back into long equity positions. You could say we are cautious at the present time.
Deutsch Bank is trading at historic lows. Europe is in a quandary. Additionally, we have presidential elections looming and rate hike fears filling every sentence in the financial media’s agenda. With all of this in mind, we find it impossible to stick our neck out until we see more definitive reasons to do anything but wait.
I plan to post some setups today that are looking good. Watch list stocks have done well.
Have a great day and …….. Happy Trading – CV