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Monday, April 22, 2013

Up We Go

Once again we have retraced approximately 50% of the most recent drop, on lower volume, so it looks to me like we are going to get a small bounce here, followed by another leg down. The problem is, every time we did that during the last 6 months, it ended up resulting in another rally, and another new high, si I can't blame any bears for not gettting enthusiastic now. The bulls, though, seem even less enthusiastic, as we approach May. We will have to wait and see how this market behaves as it continues to move up, with the real possibility of a retest. The SPX refuses, so far, to break that 50dma, and until it does, you really have to give it the benefit of the doubt, I am still long, but much more cautiously than I was in February.
The Nasdaq really looks like a horrid chart: the fact that it is back above the 50dma is about the  only thing I can say positive about it (scratch that, CMF looks good also).Price realtive, despite a bounce recently, is still weak, ATR has jumped up, and this made a lower low on the last move down. No matter how you slice it, this sure looks like it is beginning a down trend. 

The Dow industrials is by far holding up the best among the major indexes, which is exactly what the bulls do not want to see. In a truly strong market, the Nasdaq qould be running rings around this. he price relative has made a pretty good drop in the last few days, but whether that is positive or negative remains to be seen.
The Russell 2000 is the index making the best case for the bears: under the 50dma, rapidly dropping price relative, and not much support below the February low. This should (assuming this bounce continues) hit the 50dma tomorrow: how it behaves there will probably tell us more than anything else what this market is going to do.

This time the dip buyers did not come out in force, aminly becuase they are probably smart enough to know that no bull market lasts forever, and this one is getting very long in the tooth. The fact that we are so long in rolling over tells me that we may have a bigger correction han normal this spring, but that is really beyond what I do here: I know we are in one, I just don;t know how long it lasts or how far down it goes.

I will have the new highs update shortly.

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