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Wednesday, June 12, 2013

Let's Retest The 50

"These are the times that try mens' souls". Well, maybe not souls, but it looks like we are going to get our nerves tried, We are now sitting on the 50dma again, and could go either way: down, and we are almost assuredly into a summer correction, and up, we are likely to have a summer rally. Which shall it be? Flip a coin. Everything else here is up in the air.

Unfortunately the Nasdaq isn't telling us much here: price relative has been going sideways, and we are just above the 50dma. Volume here is a little more decisive, but not that much more. Here, oo, we can flip a coin.
The NYSE composite is below the 50dma, but does not have a recent history of support there, it alsways bounces just below it. I would say that indicates it's laggard status, but the price relative line makes that pretty obvious. The problem is, laggard status has made no difference: this lags during rallies and pullbacks, so it is not helping us at all.

Ticker Relative Strength Index (14)
XLF 48.53
XLI 48.31
XLK 46.43
XLV 46
XLB 45.58
XLY 45.4
XLE 45.2
XLP 44.51
XLU 32.38

Here are the sectors ranked by RSI. We are getting rotation in the leadership, but the bottom sectors really aren't moving. None are now over 50, but we also have none under 30, so this is not at a point of imminent reversal.

XLF has moved into first place. It is slightly out performing the market right now, but the Elder impulse chart just posted a sell signal. It has already had a false sell and a false buy, so I would not assume this was either valid or false. Basically, we have to sit on our hands until this establishes a trend in one direction or the other.

XLU is still in last place, but notice the slowly rising price relative line: his may have found a bottom. However, that does not make it a buy: finding a bottom does not mean it is going to go up. Basically, this is in no man's land.

The market, while still above support and nowhere near giving bearish signals, may be struggling harder than expected. We are getting all kinds of gyrations in the forex and bond markets, and those will have dire, and unpredictable, effects on the stock market.

I will have the new highs update shortly.

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