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Thursday, September 12, 2013

Correction Coming? Don''t Bet On It

Interestingly, we broke through the R1 pivot point yesterday, which should have been extremely bullish, but pulled right back below it today. However, volume was relatively low and we did not rack up a distribution day, so this, for now, appears to be a one day wonder. We are a bi overbought here, and bot stochastics and MACD look likem they are going to flip over, but that does not necessarily mean we move down: a slight pullback or even a sideways move will bring those down a bit. While this could conceivably be the start  of another correction, it is way too premature to call it now, and the evidence doesn't support one yet.

The Nasdaq 10o appears to have been stopped cold by it's R2 pivot point, which ould explain why the Nasdaq has been lagging lately  It appears this is going to really have to struggle to go higher, but for now, it also looks like it is not going to collapse; if anything, I think we will see a very small pullback.

The Russell 2000 has stopped and turned tail without hitting any known resistance point,  and took a pretty good hit today, but is sitting on support now, and is not likely to drop much further, If it does, the market will likely follow, and we will enter yet another correction, but again, the evidence doesn't support that scenario yet.

The percentage of stocks on the NYSE above the 50dma this week moved from the bearish to the bullish terrirory. Crossing 55 usually about coincides with an IBD follow hrough day; we never got the follow through from IBD, but they did call a resumption of the up trend when the Nasdaq went to a new high, so this is following the normal script. This should have nothing more than minor pullbacks at least until we get above 75.

The same indicator on the Nasdaq, which has by far been the strongest of the two. This hasn't had anyhing more than a minor pullback since Apirl of this year, and hasn't had a real correction since last November. With it risng well into bullish ground, it is not likely to have another correction for at least two months. It is pulling back right now, and there is nothing abnormal about this: it may pull back for another day or two, but will reverse and head higher until it gets well above 70.

Judging by today's charts, we are very unlikely to enter a new correction for quite some time. I have been expecting a market top sometime in the next few months, but it might take a lot longer than I initially thought.

I will have the new highs update shortly.

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