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Thursday, July 22, 2010

Bernake Traps A Few Bears

The market silliness continues, after yesterday's debacle in which Bernanke, telling what can best be described as the truth, let Congress know that we are not in a run of the mill recession recovery, that the situation is far more serious. The market, understanvably, sold off heavily, but for reasons I can't fathom, rallied jsut as sharply today. Although we did get some good earnings reports (and a few strong stocks breaking out), there was nothing to explain the bullish fervor, except for the fact that we started the day well under resistance, and that left the market plenty of room to rally....right into that resistance. We are getting there now, and tomorrow will be an important test. The market needs to break out over 1100, and the technical indicators say that we may just have the juice to do it.

The Nasdaq managed to get through the 50dema, but of more significance it also broke through thee 50dsma (not shown here), but is still under the 200dsma. The simple 50 day average is the one that has been giving this fits, and today's brealthrough has to be a bullish development.

The Russell 2000 is now poised to take onn the prior high and establish itself in an uptrend.  The technical indicators, particularly stochastics, give it room to move and plenty of momentum, but here, the 50dema has proven to be stiff resistance. We should get some idea tomorrow on whether it holds or not.

Yesterday I noted somewhat bullish developments on the charts of the percentages of stocks above the 50dma. Today I'm looking at new highs: first the Nasdaq, which seems to have a level right around 40 which is the "bull-bear" line. We are still below it here, but rising. The descending 200dma does not help us here, but the 50dam appears to be trying to turn..

For some reason, as with yesterday, the situation on the NYSE looks quite a bit better. This is well above the "bull-bear" line, above the 200dema, and the 50dema is now rising. Judging from this , this correction we have been in may well be coming to an end.

The market appears to be, at least for now, ready for a rally. How long and how high is totally unknown, but the bearishness may have rune it's course. The market has already figured out the economy sucks, but it is also betting that some sectors of the market will still do well, Our jub is to figure out what those sectors are.

I will have the new highs update shortly.

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