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Wednesday, September 25, 2013

False Alarm?

After 5 days pf dropping, we finally got the Elder impulse sell signal today, which says two things: the market was pretty damn strong before this, and it is now time to buy again. If this sell signal turns into a false alarm, then this should mark the approximate bottom, and we should go into another substantial rally. That is, of course, if this is a false alarm, which we won't know for a few days. however, the probability is that it is.

The Nasdaq barely pulled back while the rest of the market was taking a good hit, which is a bullish sign, and part of the reason I suspect this is a false sell signal. Price relative has slowed, but is still rising.

The NYSE composite has an uglier drop, but is also is a bullish position, sitting on what looks like o strong support level, and with a rising price relative line. If this does not lead the market up, at least it won't be a drag on a rally.

Ticker Relative Strength Index (14)
XLI 62.64
XLB 59.59
XLK 58.33
XLY 56.89
XLE 56.42
XLU 52.6
XLF 50.06
XLV 47.87
XLP 47.5

Here are the sectors ranked by RSI. The biggest change is the RSI values themselves: last week there were 5 sectors over 70, meaning we were due for a pullback, and we got it.

 XLI is still in the lead. This pulled right back to support and bounced back up. The bounce has been weak so far, but should pick up a lot of strength if the rest of the market follows.

XLP is still lagging, but even here, it took 5 days of near free fall to flash an Elder impulse sell signal, showing that even this had a lot of strength last week. This may continue to drop to support, bu will probably bounce when it hits it.

Then market may be ready to resume the FOMC rally, turning this pullback into a bear trap, bu it all depends on  this sell signal we are getting on the Elder impulse chart. If it turns out false, we are still in a bull market, but if it turns valid, we are in for a very hefty correction.

I will have the new highs update shortly.

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