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Wednesday, September 4, 2013

Possible Follow Through Day

Volume higher than yesterday, and a gain of .81%, by the book is not enough to qualify for a follow through day, but IBD might call one anyway. I would treat it as if it were one if it weren't for the fact that we are still below critical resistance at the P pivot point and 50dma, and the fact that leading stocks really didn't o much today. However, another day like this should put a crimp in the bearish scenario I had all planned out for this month. Technically we have support at the S1 pivot point, but last week's low is almost exactly half way between pivots, and is the real critical support. If we stay above that, we are in for a bullish month. By the way, we are no on an Elder impulse buy signal, which, during bear phases, usually marks the top of bounces.

Thanks to last month's relative strength on the Nasdaq, this month's pivots are pretty compressed, and if the price relative line breaks out, I do not imagine that R1 will mark this month's top. R2 takes us to a new high, and I think, for now anyway, that that is a pretty reasonable target.

The NYSE composite is nearly identical to the SPX, and with a sideways moving price relative line, that sounds about right. This is also on a buy signal, but with the market in a correction, it is usually prudent to wait a few days to see if it is valid.
TickerRelative Strength Index (14)

Here are the sectors ranked by RSI. With XLB and XLE now leading the market, we may be seeing the last gasps of a bull market.The defensive sectors are lagging, but that may be due more to interest rates than to bullish sentiment in the market.

 XLB has been the market weakling for a long time now, but just recently started gaining strength. Commodities are usually the last place money goes before the big bear sets in, and we may be seeing that now.

XLU is on last place. Right up until the end of last year this was a very reliable indicator of market health; when it lead, the market was bearish, when it lagged bullish. However, with the dividend sell off last year and the interest rate implosion this year, it may be a long time before we can rely on this.

Two trading days into the month, the apocalyptic implosion that I was sort of expecting (or maybe hoping for) has yet to happen, and it is starting to look like it won't. If we don;t already have a confirmed rally, we will very likely get one very soon, so about the best us bears can hope for is a screaming rally this month, followed by an equally screaming drop next month.

I will have the new highs update shortly.

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