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Thursday, July 7, 2011

Breakout!

 I have not seen a copy of IBD for at least a couple of weeks, so i don't know what market status they have us currently in, but this is the first day since the market turned almost two weeks ago that remotely looks like a follow through day, so if you had waited until now to start buying, you would have missed a substantial gain (you also would be taking a whole lot less risk, but that is the subject for another post). Today mrked s significant breakout past a very nasty, and technically significant, resistance level at 1340, which should now be a support level. We are now in the range between there and the ultimate top at 1370, and despite being overnought, look to have the momentum to get there.

One clue that the market was going to break out was the recent strength of the Nasdaq, which made mincemeat of it's resistance level by gapping over it,.Stochastic are slammed up to almost 100, badly overbought, but MACD histogram continues to rise. This move will end sometime, but probably not right away.

The Russell 2000 was the only index showing any signs of slowing down, but that didn't phaze it today. it has almost gained back what it lost during the correction, and will likely be testing the old high, possibly as early as tomorrow.


The percentage of stocks above the 50dma usually goes above 50 about the time that the market gets a follow through day,  although the NYSE hit 50 a couple of days ago. Since it has stayed above 50 for more than a day, it is a fairly safe buy signal.

The same indicator on the Nasdaq, slightly weaker but still rising. This has been the first real correction we have had in about a year, but it does appear to be over.

Since hitting bottom in March 2009, the market has had, other than the correction of 2010, a series of short, shallow pullbacks followed by spectacular V shaped recoveries, which in the past have been considered a sign aof weakness. So far the conventional wisdom has  been turned on it's ear, the result of unprecedented, and ultimately probably disastrous, intervention. but that, too, is the subject for another post.

I will have the new highs update shortly.

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