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Thursday, April 14, 2011

Correction Coming Up?

The simple 50dma is now broken, and the exponential average almost broke, but we reversed during the day and finished slightly higher. That along with the long tail, could qualify as a key reversaal, but i on't think volume was high enough. I do, however, think a bounce here is increasingly likely, but I doubt it is very strong. According to the stochastics, we are at least a day or two from being oversold, and MACD is now headed down, so the probablity is, for the medium term, we are headed lower.

The Nasdaq 100 has the good fortune of hitting bottom two days ago, but the misfortune of breaking both 50 day averages, and despite moving higher after a gap down this morning, doesn' look to me like it is going to hold up very well here.

The Dow tranports, like the Russell 2000, were leaders on the way up, but unlike the Russell, has held up much better and is still well above both 50s. Stochastic are flattening out a little here, so this now has very little downward momentum. If the market reverses we will probably see it here first.

It's Thursday, time for my favorite market internal, the percentage of stocks above the 50dma, in this case the Nasdaq. We have dipped below 50 again, but one day does not make a correction. If it stays below 50 for more than a couple of days, it is usually a very reliable indicator that we are in a real correction rather than the pullback we got last month. The bounce off last month's dip was pretty weak, which could be an indication we are in for some serious weakness here.

Here is the same indicator on the NYSE, and it is in just about the same shape. IBD has the market under pressure, which probably won't change today, but it will go into correction if this doesn't start going back up.

I will have the new highs update shortly.

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