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Thursday, June 20, 2013

Bernanke's Gift

The 50dma held for a while, but ultimately the selling pressure was too much and it has finally given way. It appears that the long awaited correction, not the piddly pullbacks we have been getting, but a real serious correction, has finally begun. How severe this gets is unknown at this time, but was did hit a potential support level today at the pivot point S1, which I have been suspecting would be the low for this month. At this point, if we  get a bounce, I would assume it to be just that: a bounce which will not get us into a new up trend, just slow the collapse, until proven otherwise. The market could be in serious trouble right now, and it has been a while since it has visited the 200dma, so it may be due.

The Nasdaq 100 is also visiting it's S! pivot point, so it may also be poised for a bounce.This is now showing at least a little bit of relative strength, so all is not yet lost for the bulls. Volume has been hellacious to the downside, but may also be reaching a peak, which is where the market normally reverses. Even with the potential for a bounce, this might be best left to the professional knife catchers.

The Russell 2000 is either 1) stronger because it is farther above the S2 pivot point, or 2) has a lot farther to fall. Judging by what happened today, I would lean toward the latter.

This is the percentage of stock above the 50dma above the NYSE, with a horizontal line at 55, the "bull/bear" level. The trouble is, not this is below 35, which is the "firmly bearish" level, and also the territory where it usually reverses quite quickly. The only trouble is, it usually gets into the teens before it reverses, which means we still have more carnage to go. One thing we have going is that this is not behaving anything like it normally does, so there is no telling what it is going to do. However, it does tell us one thing: we are firmly in a correction.
We still have the divergence between the NYSE and the same indicator on the Nasdaq, although it has lessened some, and this is about to break the "bull/bear" line, which is 50 on the Nasdaq. We can probably expect a bounce soon,.but for the next month or so, the major trend on this should be down. This also will likely get into the teens before reversing, unless Bernanke pulls another rabbit out of his hat.

Bernanke was probably hoping that he would be out of office before the bill for QE came due, bug that might be happening now. While it is normal for the stock market to have corrections like this, it is not normal for it to happen while Treasury yields are making big, and sudden moves up. It could be that the markets are abut to put a stop to the trillion dollar deficits we are running, and frankly, it's about friggin time. I just hope it doesn't do much collateral damage in the process, bu I am not optimistic.

I will have the new highs update shortly.

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