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Monday, October 11, 2010

4Th Down And Goal to Go

 You would figure that a day after the 60 Minutes expose of high frequency trading, the boys would ly low for a while, and perhaps they did early in the day, as today's volume was very low, but during the last hour and a half, we had a pretty breathtaking drop. I don't know for sure it was the HFT boys, but a move that big, that fast, on no news, was either them or the big money funds selling out. Either way, the market established a new short term resistance level at 1168 ans a new short term support at 1162. Another development; the bearish "wedgie of death" being formed in the last couple of weeks. Once again, things are pointing to a downleg, but they have been for a while.

 Coming off the September follow through day, the Nasdaq lead the market up, but now the price relative has reversed it's trend and, despite a recent bounce, is trending down. Another indication that the market is severely weakening, but like a football team that out gains it's opponent, has a better turnover ratio, and better third down conversion rate, if it doesn't show up on the scoreboard, it doesn't count. So far, the scoreboard is still in favor of the bulls.

 The Dow is now pretty much flatlining against the SPX, which is yet another indication of overall market weakness. Yet, price just keeps going up. But don't blink, we are now stiing right below a major resistance point.

What is moswt striking about the Russell 2000 is how much it looks like a bottom formation that a topping formation. The continuing to rise price relative line is showing an overall strengthening trend. The other indexes show declining CMF, while this one is rising barely (yes, it is an ETF, and that makes volume not as relevant).
This is just below a resistance level, which could be an opportunity for a pullback. Best case is a bounce off the 50dma, second best off the 200dma, worst case is a plunge through the 200dma and a resumption of the bear market. Whichever it is, we will probably see it here first.


The dollar is at a 6 month low, but for the last year is still above the low hit in December, when the Euro starrted to unravel. Bernanke managed to reverse that (assuming that is what he was trying to do)  bu the drop did not result in a rip your face off rally until he started hinting about QE2. We got another little bounce today, but are in a ferocious down trend and getting close to the nearly year old low. That's good news if your assets rise faster than the dollar drops, bad news if they don't.

I will have the new highs update shortly.

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