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Wednesday, March 21, 2012

Buying Opportunity Coming?

Here we have the Elder impulse chart, which is giving us a cluster of blue bars, signalling a possible trend change coming. However, if the bull market is to continue (there are some, but not many, indications it may not), a red sell signal will in actuality be a buy signal (the opposite happens in bear markets; green buy signals are really sell signals. In range bound markets trying to follow the signals can get you chopped to pieces). One reason I'm not a gazillionaire is because I have been cautious during times like this: that may change as I get more aggressive during pullbacks, using stops in case I'm wrong. I have been a singles hitter up to now, but to make real money in the market you have to be ready to swing for the fences.
The price relative line on the Nasdaq has broken out and looks like it is going to put ion another up leg. If so, this rally is not over.

The price relative line on the Russell 2000 is now trending sideways. If it starts dropping, this rally is over.

Ticker Relative Strength Index (14)
XLK 78.54
XLY 73.32
XLF 73.07
XLP 69.75
XLV 60.55
XLI 57.02
XLB 54.44
XLE 45.28
XLU 39.74

Here are the sectors ranked by RSI. Not much change here, but XLF is moving up rapidly.

XLK is, despite being horribly overbought, still out performing the market, and might just be the market.It looks like it is running into resistance here. and is very likely to at least pull back a percent or two.
XLU is lagging badly, price relative is dropping again, but it may be finding a support level here. If the market starts to weaken, this could actually start moving up. One thing I find interesting here is the strength of CMF, which, despite this dragging along the 50dma for months, has remained positive.

We are now close enough to the 2007 high on the SPX that TPTB will very likely mnake sure we get there. Whether we have a correction before or after is unknown: right now I suspect the most likely thing to happen is a minor pullback here, another run past 1500 and on to the old high, then a pretty major correction. I have ben hearing that there is now way the market will collapse before the election. I heard the same thing in 2008.

I will have the new highs update shortly.

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