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Thursday, July 29, 2010

Holding Support

One of these days I will have to post a chart without moving averages, because it is now approaching the point of the absurd. Today's intraday range was marked, almost to the penny, at the top by the exponential 200dma, at the bottom by the simple 50dma. The main thing of note: we did finish one point above the pivot point at 1100 (if indeed the pivot point is there: like Hubble's constant in astronomy, we don't know if it's true but we have to assume it is, otherwise our whole theory falls apart).  Volume was also on the increase, but w did finish well off the low, so there was a critical defense set up here.

The same moving averages don't have much meaning on the Nasdaq, but the exponential 20dma provided support here.After a very nasty sell off after a gap up open, we managed to get a rally which, as on the SPX, got us above the pivot point.

The Russell 2000 looks like it is in much better shape here, well above the moving averages (50 and 200 bith simple here, illustrating the "death cross" we had yesterday. Today's candle looks quite bullish, with the close in the upper half of the day's range. Stochastics dropped through 80, normally a bearish sign, but it could just mean we have worked off being overbought.

The new highs on the Nasdaq, while improving, do not yet look particularly bullish, at least on a 6 month chart. The "bull-bear" line, which looks to be right about 50, and we are under it now, but not to the point where a collapse is imminent. The leadership, though, is getting narrow here.

The new highs on the NYSE looks positively bullish. In the last couple of years, it has not been a positive sign when the NYSE outperforms the Nasdaq. That could be changing, but the jury is still out.

The market is now down 3 days in a row, and hasn't given up half of what it gained since the last pullback, reinforcing that this is a pullback in a rally, rather than a correction. Now it has to prove it by starting to go up again. It is closing in on critical support levels, so tomorrow may bring us some pretty important tests.

I will have the new highs update shortly.

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