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Monday, October 31, 2011

Europe Is Saved - Wait, No It Isn't

 I did not even try to follow the debt situation in Europe, as it is just about impossible to get any really accurate information, and the situation changes way too fast. I expected last week's deal to fall apart over the weekend , and apparently it did, as the market really took a dive. Volume was low (the volume here might be revised higher, which will be enough for a distribution day, but volume was low on mot of the stocks I was watching as well), so this may be a one day drop, but it does appear that the market has found another resistance level as we get into the last area of price congestion. 

 The Nasdaq hit that same area of price congestion, and had the same response. Volume was low here as well. CMF is quite high both here and on the SPX, so it is unlikely that the big money boys are pushing the panic button yet.
Both the Nasdaq and Dow industrials have been essentailly flat in price relative for about a month, a situation that can best be described as neutral, which is strnge considering that thi last mnth was the 12th best month in market history (I only saw a headline, I did not read the story, but apparently October was the 12th best month in history). Either the Nasdaq/Dow indicator no longer works, or this rally is about to fail.

If the Russell 2000 is a reliable indicator (normally it is, but this time might "be different"), then it will fail. This came right up the the 200dma, almost to the penny, and was thrown right back, and what's worse, the prie relative line is lower than it was back in August, when price was quite a bit lower. At least in the short term, it looks like we are in for some weakness.

What looked like a decent pullback turned into a rout going into the close, and it still may turn out to be a small pullback, but mney flew into treasuries today, the 30 year yield dropping 4.5% and the 10 year over 5%. That usually does not happen in pullbacks, but, this time might be different. Yeah, right.

I will have the new highs update shortly.

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