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Charts courtesy of stockcharts.com

Friday, March 15, 2013

Friday Weekly Charts

We are exactly in the same position we found ourselves in 2 months ago: having hit the ultimate resistance at R2, we paused briefly, but then broke out past it, an act that, in January, had had no precedent in the prior 3 years. You had to figure that if it was such a rare act, it would be a long time before it would be repeated. "Long time" turned out to be 2 months. This time, however, we are facing the prospect of weakening market internals, somewhat lower volume (today was a quad witch day, which accounts for the big volume spike), and a generally overbought market. None of that made any difference, however. We shall have to wait now to see if this turns into a bull trap (I am starting to smell one coming), but all things considered, we are about as bullish as you can get. Than makes me think we are not going to go much higher, probably about 1575-1580, before really taking a dive.

On the weekly chart, we are headed for the yearly R2 pivot, again, without precedent, at least this early in the year. There is no precedent for going higher (possibly in 2009, but that is outside the stockcharts' 3 year window). So, we are getting close to the point where either we enter uncharted territory, or we go into a correction.
The Nasdaq, the most prone to bubbles, seems now to be the only voice of sanity in the market. It is going up a at a reasonable rate, is well below R1, and volume is not on the decline. CMF is low, but about what you wuld expect considering how relatively low the gain has been.

The Dow continues to march to new all time highs, with a nearly straight up move since January. If I didn't know any better, I would be worried about a bubble forming here.

Well, maybe I don;t know better. If the Dow transports are not in bubble territory, I don;t know what is. This has been a straight up move since January, with no sign of stopping, or even slowing down.

The Russell 2000, which is usually the best indication of what the "smart money" is doing, is also in bull made, and also in no hurry to stop.I suspect this will hit R2 easily, possibly even before the end of this month. I;m not even going to try to guess that happens after that.

Bernanke's goal from the outset (and he has even admitted this) has been to create another asset bubble to get us out of the hole created by the last bubble he created. Mission accomplished. Now, the real question is, is that really a good idea? He doesn't have to answer that, he will be well out of office by the time the repercussions hit us, or more accurately, our kids. We are seeing one of the greatest transfers of wealth in history, from the bottom to the top, and when this one pops, it will have major consequences. 

I will have the new highs update shortly.

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