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Monday, July 25, 2011

Range Bound Summer

The good news is that we came off a nasty morning drop to rally back to near even, but the bad news is we gave half of it back before the close. While it is extremely premature to declare the recently confirmed uptrend over, it is also a bit bearish that we failed to reached the previous high before getting the first pullback. Volume was quite low, so the damage was minimized.  All in all, today looks like it might have been a very good buying opportunity.

The Nasdaq had a near identical day, and in fact finished at exactly the same percentage down as the SPX.  That shouldn't be surprising, since price relative has been going sideways for a couple of weeks now.

The Dow industrials are also trending a bit sideways in price relative, which may be a good sign since these tend to lead in times of market weakness.So far it suggests we may be range bound for a while, and the double top this just established strongly hints at that. We are now getting deeply into the big money vacation time, so low volume will most likely be with us until after Labor Day.

Well, this isn't good. The price relative on the Russell 2000 is dropping and is now lower than where it was at the previous low, depite the fact that price is substantially higher. The Russell is really lagging now, and that is almost always  very bad sign (although when it lagged in 2006-2007, it was nearly a year before the market finally rolled over, so this is not a sign of immediate doom).

I will have the new highs update shortly.

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