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Friday, October 21, 2011

Friday Weekly Charts

If 2 points above the previous high constitutes a breakout, then the SPX broke out today, but it wasn't that convincing.  In fact, the entire move from October 4 has been suspect, as it was very sharp, with nothing kike a real pause, much less a pullback, and leading stocks have not been taking part. I could whine about the volume, but it actually hasn;t been bad. What does concern me is the lack of big money buying as evidenced by CMF, which is a little on the low side, but that is balanced by a lack of big money selling. Conventional wisdom (and some historical evedence) says the market bottoms in October and enters two of the more bullish months of the year, November and December. We aren't out of October yet, but it is highly unlikely we will get to a new low before the month is over. Basically, we are in bullish mode until another "black swan" event, of which I expect several in the next few months. Until then, I would be in buying mode, if I could find something to buy.

It is probably a cinch that we will test the 40 week average. It has been a long time since we have spent this much time under it, and I would be surprised to get through it on the first try. If we do, we have a big price congestion area above it. Anyone expecting to get through it easily and on to a new high is either certifiably insane or has inside information from the Fed.

This is a bit ominous. The Nasdaq did test the 40 week line, and ended up the only major index with a negative week.  MACD and stochastics say we will probably go up from here, but gettting through that 40 week line i not going to be easy. 
The Dow should be the next to test the 40 week, and here, too, just above it is massive price congestion. 

Th good news is the Dow transports made a big move this week, and are also getting lose to a test of the 40 weeks line. The bad news is it is miles below the midpoint of it's trading range, indicatiing that despite a good week, it is still terribly weak. It is also an indiation of where the current strength is in the market: the most beaten up sectors are getting the bid, while the strongest sectors are not.

Except, that is, for the Russell 2000, which not only got beaten senseless on the way down, but has barely been able to get off the floor on the way up. If there is a reason to be bearish right now, it is here. The market can rally without the Russell 2000, but when it ends, it usually falls hard.

I wihs the charts could tell us what kind of news is going to come out of Europe this weekend, but at this point it looks like the market is expecting something big. We could get a nasty surprise come Monday if they don;t deliver.

I will have the new high update shortly.

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