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Wednesday, December 7, 2011

Today's Leading Rumor

 Today was the obvious buy the dip and wait for the rumor day, and it worked like a charm, as the latest rumor came about an hour before the close, only to be denied in the last 15 minutes (the resulting drop arely dented the gain). It was enough to send the HFTs into a frenzy.A week ago we got the buy signal on the Elder impulse chart, and while the gain hasn't been impressive, it is still in force. The SPX appears to be running into resistance at about 1270, and still probably has support at 1215, a level we may revisit soon. A rally going into year end is just about expected right now, which means there is a pretty good possibility we won't get it. Notice that CMF has been dropping while the market has been going up: this rally is just not being supported by the big money crowd, and it appears they are selling into the strength.

The Nasdaq also still has a green signal, but is looking a lot more toppy than the SPX. Price relative is still dropping, and if that doesn't reverse, I doubt that Santa will be coming to Wall Street.

The Russell 2000 is looking a little toppy as well, but the price relative line is rising here. It may be a little early to be calling for the demise of the market.

Ticker Relative Strength Index (14)
XLP 62.98
XLY 60.24
XLF 60.09
XLI 59.58
XLV 58.47
XLK 57.46
XLB 57.39
XLE 56.73
XLU 55.97

Here are the sectors ranked by RSI, which is probably not the best indicator of strength but it does indicate relative strength over the past month. The strength of XLP is nor surprise, but the weakness of XLE and XLU is.

CLP actually broke out to a new high last eek, but is struggling to move up. My very conservative estimate here for a target price is 32.44. If this continues to lead, expect more market weakness.

XLU is the weakest by RSI, but has a pretty decent looking chart. The fact that is has underperformed for the last month is probably due to just good old fashioned sector rotation, so this will probably lag for a while until the big money decides to get back in. That will probably take a while.

Today was a day trader's dream: buy the drop in the morning and wait for the rumor du jour to jack the market up. Somebody blew it and denied the rumor before the lose, but the damage was minimal.  Other than that, I think it is probably certifiably insane to be taking long term positions between now and the end of the year.

I will have the new highs update shortly.

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