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Wednesday, May 8, 2013

The Last Bear Standing Falls

We got, oh, about 15 minutes of correction this morning, followed by another massive rally, once again on higher volume. This market is really picking up some steam, and anyone still leaning bearish is getting steam rolled. I had been getting bearish or semi-bearish signals since about mid January: those have all disappeared now, and all signals are bullish. The only thing to be concerned abut now is getting overbought, but that is still at least a few days away, and on overbought market does not necessarily have to cone down.  It looks to me like my target here is pretty safe: if anything, it may be too conservative.

What triggered the Nasdaq to start leading the market is unknown to me (although I think the Japanese putting Yen devaluation into hyper drive had a lot to do with it), but this was the biggest reason I had been leaning bearish. It is no longer giving me a reason.

Even the NYSE composite is now rising rapidly. Price relative is rising slowly, which is probably an indication that this rally is very broad based.

Ticker Relative Strength Index (14)
XLY 70.32
XLK 69.41
XLF 68.59
XLI 67.71
XLE 64.83
XLB 64.3
XLP 62.45
XLV 57.08
XLU 52.14

Here are the sectors ranked by RSI. This is truly amazing: the defensive sectors, which had been leading for a few months, have dropped into the last 3 slots in one week.  We are close to overbought here (normally, having 3 or more sectors with RSI over 70), but, again, being overbought won;t stop thse from going up.

XLY is now the leading sector. This has been in a steady up trend in price for 6 months, price relative for about half that time. If I didn't see the ticker symbol, I would swear I was looking at a leading stock.

XLU is in last place. It appears the relationship beween this and the market has resumed: when this is leading, it is bearish, when it is lagging, it is bullish. The price relative is in free fall, so this is lagging big time.

Fortunately I am no one of those Bozos that has to come up with a "reason" for a market rally, so I won't sing the praises of the Fed or the Obama administration (if anything, we owe this to the central bank of Japan). The economy may be "better" (which begs the question, better than what?), but certainly not good enough to rally the market like this. Whatever it is, it looks like it is going to continue, probably for quie a while.

I will have the new highs update shortly.

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