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Wednesday, June 19, 2013

Bernake Speaks, Market Freaks

Live by QE, die by QE. While the FOMC announcement seemed to have minor effect on the market, in the aftermath the Forex and bond markets went into a tizzy, and that sent the stock market into the crapper. This may have killed any chance for a summer rally, as the markets are now so dislocated that it is nearly impossible to make sense of them, and it is likely some heavily margined players are going to be getting calls, which means they start selling to raise cash. While this doesn't appear to be any worse than the other recent down days we have had, under the surface I suspect we are going to be seeing some serious damage done. I was prepared for the possibility of a negative market reaction, but I did not expect one this negative. Ouch.

One bright spot for the bulls is that the Nasdaq held up relatively well, stayed above support at it's P pivot point, and is still well above the 50dma. Volume was heavier today, but not much heavier, and the drop was fairly mild.
No so on the NYSE composite, which continues to drop in relative strength, can;t get above it's P pivot point, and blew right through the 50dma again. It is ilikely this is going to head for the S1 pivot, which is a pretty substantial drop from here.

Ticker Relative Strength Index (14)
XLI 53.69
XLY 53.59
XLK 52.98
XLE 52.61
XLB 52.39
XLF 51.25
XLV 48.43
XLP 43.87
XLU 37.66

Here are the sectors ranked by RSI. Once again we see rotation at he top, but none at the bottom.

XLI has taken the lead, but don;t expect that to last long. This had a brief spell pf relative strength in May, and is doing reasonably well now, but reasonably well won;t keep it in the lead. This is highly unlikely to get above the R1 pivot, but also unlikely to break the P pivot, at least in this month.

XLU was tryng to claw it's way back from the brink, but slipped on a bar of soap today and gave most of it back. As interest rates continue to climb, this will get killed. However, we can expect Bernanke to throw everything he has at the bond market to keep rates from rising (an instantly bankrupting the U.S. government), but it is now starting to be rrealized by the market that he might not succeed.

Another episode of Wall Street Held Hostage has ended, and this time it did not have a happy ending, unless, of course, you had the prescience to go short.We are overdue for a big one, and this may be the start. But then again, it may just be another in a long line of dip buying opportunities.We shall see in the coming days.

I will have the new highs update shortly.

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