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Wednesday, September 11, 2013

Bullish Ground

In 3 days the market has cleared 3 major hurdles, the third being the R1 pivot point today. You might expect the market to pull back a bit and rest, and it almost did today, but the bulls caught fire just before noon and pushed the market positive. We have been on an Elder impulse buy signal for a couple of weeks now, so this rally may be getting a little long in the tooth, but at this point I don;t see any reason to believe we are headed for anything but a very mild pause. We did get a valid sell signal in August, and got a correction out of it, but the second sell signal was false and market the bottom of the correction, putting us back firmly in bullish territory. The next sell signal, which won;t be for days if not weeks, will tell us more about the health of the market. If we get a valid sell signal before we get out to a new high, then we may be in for a pretty nasty correction. If it turns into another false alarm, we could get an equally nasty (fir the shorts) move to the up side.
The Nasdaq is starting to under perform a little, and in fact did quite badly today, thanks primarily to another egg laying exercise by AAPL. This may be a fluke, but if it is the beginning of a trend reversal, the market might get into a little trouble here.

The NYSE composite is strengthening quite a bit, and has been outperforming the market, if slightly, for the past two months. Once again, it seems to make no difference to the market: we had  two rallies and one correction during that period.

Ticker Relative Strength Index (14)
XLB 69.69
XLI 67.5
XLE 66.29
XLV 66.21
XLY 63.28
XLF 58.44
XLK 57.59
XLP 52.63
XLU 39.21

Here are the sectors ranked by RSI.There was not a lot of change this week. We have no sectors over 70, so by this indication we are nowhere near overbought.

XLB, after months of terrible lagging, started to out perform the market slightly in July, kicked it into gear in August, and price relative is still rising in September. A lead by this sector is a double edged sword: it could mean rapid economic growth, or it could mean a weakening dollar. Lately, I think it has been the latter.

XLU is stlll mired in last place, is under the 200dma and can;t get back above it, and may be bout to flash another sell signal. It may also be a target for sector rotation, as these may be priced about right to attract the attention of some of the big money crowd. A lot will depend on how high interest rates go, and right now it is very unclear what is going to happen there, so I'm not too sure I would be jumping on this.

The market could have sold off today and we would sstill be in bullish shape, but as it was, the early sell off was bought up, and by mid day we were back to positive. That is one of the marks of a market in a confirmed rally, So I will be trading accordingly.

I will have the new highs update shortly.

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