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Thursday, September 26, 2013

The Bulls Gain A Foothold

It was about time we got a bounce,and it came, near support, and at month end, but it was weak and on low volume. It might be logical to assume this is a bounce before another drop, and it could be, but for several reasons I don;t think that is going to happen.

For one, the Nasdaq has resumed leadership, and the Nasdaq 100 is knocking on the door of resistance. We had low volume here as well, but I suspect we are going to get a lot more on a breakout: there are probably thousands of computers watching that level waiting with a ton of buy orders, so we may see a rush of volume on a breakout.

The Russell 2000 is even more impressive, as it was rising while the SPX was dropping. We could see this make a big move on a breakout, and that may well come before month end.

The percentage of stocks on the NYSE above the 50dma is a little ambiguous, with a breach of 75 followed by a sharp but shallow drop. That could be a peak, but it is highly unlikely: this normally peakes in the low to mid 80s, and it looks like it wants to do that again.

The same indicator on the Nasdaq is much more certain: this is telling us this bull move has plenty of room to go. This should peak around 75, and is nowhere close yet. Judging by historical behavior, which has been very consistent, this rally has at least a month to go, and maybe longer.

It is apparent, at least to me, that this rally has farther to go, at least into October and possibly into year end. I have been convinced all year we were approaching a long term top, and I still think so, but we may be farther than I thought.

I will have the new highs update shortly.

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