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Wednesday, February 2, 2011

Wednesday Wrap

Today we did not really come close to testing the new resistance at  1308, but did not come close to esting any support a all. Normally a very slight pullback, on light volume, after a move up is very bullish, and that is what we got today. Last Friday we got a sell signal on the Elder impulse chart, but no follow through on it, and in fact are on a new buy signal. Ever since September the Elder impulse signals have not been terribly reliable: whether that is an anomaly or if the Elder impulse system is flawed, i don't know, but looking at recent past charts, it does look pretty reliable. The down trend in CMF continues, but it is still very high, and the market often moves higher for weeks after CMF peaks.

CMF is rising on the Nasdaq, despite the fact that it has not hit a new high yet. It appears we are going to be seeing some rotation here after about a month of relative weakness. Friday's drop was a little more severe here: the Elder impulse signal did not change for a couple of days.

When last I looked at the sectors, XLB was the leader by RSI, but not now. XLE has taken it's place, and since oil was the primary catalyst for the market frop on Friday, this was not hit, certainly a big factor in it's current lead. 
XLB now ranks number 4 in RSI, behind XLE, XLI, and XLK, but it's lagging status was due to a big hi in the mini-correction we had last month. It has bounced back pretty strongly, and may resume leading the market here.

XLP is the weakest by RSI, and this looks like it is on the verge of breaking down. Market cheerleaders will tell you this is good, that traders are moving into higher risk areas, but I'm not so sure. This is having trouble getting back through the 50dma, and if it does break down, eventually the rest of the market will follow.

I will have the new highs update shortly.

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