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Wednesday, December 21, 2011

Trouble On The Nasdaq

Yesterday's rally was powerfjul enough to take the Elder impulse chart right to a buy signal mwithout the intervening blue bars, and today we got enoughof a reversal off a bad opening to keep the bar green. Once again, we broke a critical intraday support level (1232) only to quickly reverse and rally. The reason is not hard to find; the 50dma was right below that support level, So far all systems look go for a year ending rally.

Um...Houston, we have a problem here. The Nasdaq went from slightly lagging to seriously dragging the rear today, thanks to a big miss by ORCL. The price relative, which has been dropping steadily, knifed through a critical level and may now go into freefall. Santa might not be nice here.

The Russell 2000 is building up a little strength here, and is very close to breaking through an important level in price realtive. Why is the Russell now leading? I suspect the market is anticipating a stronger dollar (and/or a Euro collapse), which will be good for this in the long run.

Ticker Relative Strength Index (14)
XLP 64.47
XLU 61.75
XLV 61.23
XLI 54.26
XLY 51.93
XLF 51.59
XLE 51.3
XLB 50.63
XLK 46.36

Here are the sectors ranked by RSI. There are not too many surprises this week. XLK was in the middle going into today but really fell apart today.

XLP staged a breakout yesterday, and followed through today. I'm not sure if this means the market is expecting a long period of weakness, or if they are expecting a fairly short, shallow move down in January. Whichever, the market seems to be less than impressed with the rally attempt we are in now.

XLK took it on the chin today, but had already been weakening going into today. This plunged through what looks like a very significant level on price realtive, but price is actually above support. We will have to see how this turns out.

Today we got a not surprising pause after a huge up day yesterday, so we are probably still set for a year ending rally, but don't look for the Nasdaq leaders to play along.

I will have the new highs update shortly.

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