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Thursday, May 9, 2013

Unthinkable

The seemingly impossible happened today, the market actually dropped. While we are still a ways off the target I have here, it does appear we may be due for a pause here, and a possible shallow pullback. It could, conceivably, be more than that, but it seems pretty unlikely. If I was to make a prediction (which I'm not quite dumb enough to do), I would say we are going t drop to the 20dema, with a very likely bounce off it, but so far there is no sign this up trend is over.

The Nasdaq 100 might not even pull back here: overbought conditions here are just slowing the rate of advance. If it does pull back, that recent gap will be the most likely support.

Even a very conservative projection on the Russell 2000 gives a pretty lofty target. Here, too, it is likely we will pull back for a few days, but not very far, before moving higher.

The percentage of stocks on the NYSE never broke 35, a level I thought it had to break before reversing into an up trend. I thought that there had been no precedent for this happening before, but re-checking the historical charts, I found one: 2003, when the first correction off the early 2003 bottom looked almost exactly like this. If there is some correlation (I don't know if there is or not), then that would mean that we are in the early stage of a long up trend. In any case, we crossed the 75 threshold, which means we are firmly in a bull market. Even if it doesn't go any higher, the market usually rallies for about a month after this peaks. So it is highly unlikely we will be having a major correction, at least within the next few weeks.
The Nasdaq is lagging badly again, despite the fact that the composite is not. That is an indication that the leadership on the Nasdaq is still pretty narrow. However, the trend is up, and is will very likely be going over 70 before we have a major drop.

The correction warnings I have been getting since the middle of January have all reversed, and it appears we have anything from 2 weeks to a month before even thinking about a major correction. While it's a stretch, I am still thinking that we are in the process of a long term top, which may take a long time to form. In the meantime, the market is in a confirmed rally, and it's time to ignore everyhing else.

I will have the new highs update shortly.

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