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Friday, March 9, 2012

Friday Weekly Charts

Here we are, right back at the top, and once again, we are hitting resistance. NFP failed to impress the market enough to get us out of this range, and we have trouble brewing in Europe: apparently Greece is now considered to be in default, which means billions of dollars in credit default swaps will be triggered. I don't know what the effect will be, but last time they were triggered, in 2008, the effect was catastrophic (think AIG). I;m sure we will get more on it over the weekend, and Bernanke will make some announcement before the Asian market open Sunday night. He is now makin g it clear he will keep these markets up at all costs, and those costs are getting pretty high.

 On the weekly chart we have all the classic symptoms of an imminent correction: a failed breakout, a high volume drop folowed by a lower volume bounce, and falling momentum indicators. One I have been paying attention to lately is MACD histogram (the bars in the middle of the MACD panel). They peaked in January and are slowly dropping. That may be about the closest we get to a leading indicator.

The Nasdaq is still hitting new highs, is getting better volume, and has stronger indicators. It is slowing down, and may not be strong enough to hold the rest of the market up.

 The Dow has a failed breakout as well, and is noticeably weaker than the SPX. If we are entering a correction, we wwill see this fall slower than the SPX, but it will fall.

 The Transports are already in a correction, and worse still, never challenged the 2011 high. The rest of the market can conceivably rally without these, but I doubt it will.

The Russell 2000 bounced right off the 10 week line, but it is also looking like it is now entering a correction. It did make a nice move this week, but that comes off a slaughter last week and is probably due more to short covering than buying. We better watch this one next week, it is the one most likely to tell us where the market is going.

We should be in a correction now, and would be had not Bernanke decided to interfere. We have an FOMC meeting coming up (it might be next week, I don't remember) and I expect some creative thinking to come out of that, but ultimately, the market will correct whether Bernanke wants it to or not.

I will have the new highs update shortly.

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