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Friday, May 31, 2013

Friday Weekly Charts

Well, how did you like that one? In the span of 3 hours, the market goes from bullish to bearish. The reason? From Yahoo finance: "Market drops 1%, but is positive for May". Thank you, Captain Obvious. Whatever happened, on thing is for sure: yesterday was no fluke, the big money is selling into strength. How long this lasts I don't know, but we have a pretty good shot at testing the 50dma again.  And did you notice where we finished the month? Right below R2.

 It's hard to be bearish when the weekly chart is still above the annual R2 pivot point, but then again, it is also hard to be bullish when the market is going nearly vertical.  This move is going to end, and it will be sooner rather than later.

The Nasdaq hit the R2 pivot on the nose and is now struggling to get above it, and it doesn't look lie it will try any time soon. Then again, it also doesn't look like it is going to collapse any time soon. 

The Dow industrials are long past the R2 pivot, and barely making a move down here, which you would expect in a market heading for a correction. That has been happening for months, however, and the correction has yet to come.

Juding by the recent behavior of the Dow Transports, I would guess this makes another move up. That, however, is strictly a guess, not an investment strategy.

The Russell 2000 is the least bearish of the charts, and the one I would put the most weight behind. This looks more like a very minor pull back rather than the near apocalyptic drop we got on the SPX. Based on this, I am still slightly bullish, but the selling into strength is a very clear red flag.

I will have the new highs update shortly.

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