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Thursday, April 4, 2013

Low Volume Bounce

It might have come a little early, bu the bounce we got today was no surprise. The 20dema has been support since the beginning of March, and until it breaks we have to assume it will be. The small move and low volume would lead one to believe that this is going to be a short lived bounce that won't go very far, but again, there is plenty of support just below us, so I'm not expecting a raging bear market, either. Judging by stochastics and MACD, I do think we are in for some rough time in the weeks ahead, and I would say that, for at least the next couple of weeks, the up trend is dead.

The up trend never really got going on the Nasdaq 100, buit one thing you can say here is that there is plenty of support. If this holds up relatively well I would expect a short, shallow correction, but if it starts plunging through support levels around 2750, we could be in trouble.

The Russell 2000 gave back in 3 days what is took a month to gain, but dod find support at the 50dema. That had better hold, and the retestt may come pretty soon, as today's bounce was awfully weak. Momentum wise, we are definitely in  a down trend, but nearing short term oversold conditions. There is not much keeping this from becoming more oversold.

This, to me, is the ultimate correction indicator, he percentage of stocks on the NYSE above the 50dma. It broke the critical 55 level yesterday, bounced back above it today, but is clearly in a down trend. We may get a slight bounce here, but the probability is that we keep dropping until we get below 35. At that point, we will be in a no-doubt-about-it correction, and also getting close to a reversal.

On the Nasdaq the critical level is 50, and this bounce didn't even get that far. As far as I am concerned, the Nasdaq is already in acorrection, and will drag the rest of the market with it.  So far it has been a slow bleed: normally when this breaks 50, the drop starts accelerating. This could be in the teens in another couple of weeks.

The market has entered correction territory, even though the major indexes are not that far from the highs. We will probably get several bounces, but I expect a down trend for at least the next month, and it may go longer than that. By the time it is over, we should be getting  very good idea of where the leaders of the next move up will be, so I hope we get a nice, long one.

I will have the new highs update shortly.

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