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Thursday, October 10, 2013

Are We Confused Yet?

After hitting support yesterday, it was no surprise that we got a bounce today, much stronger than expected, but on about expected volume. We will have o watch the volume for the next few days to see if we get a follow through, but the momentum indicators look like we are in for at least a big bounce, and possibly more.  It looks like a resolution to the budget crisis will come soon, even if it's just another exercise in can kicking, and Janet Yellen has officially been nominated to be the next Fed head, so it looks like the bears are loosing the brief grip they had. We are now back above the P pivot point, and for the foreseeable future it looks like the range between P and R1 is going to be the battlefield.

One thing you can say about the Nasdaq 100 is that it's prior strength gives it less of a momentum shift than the SPX; tha is not to say it won't get as much upward momentum, it just means it won't look like it.

One thing is clear on these charts: a break of the 50dma is being seen as a buying opportunity rather than a panic area. The Russell 2000 used the 50 as a launching pad today, and as expected, out performed on the way up. One thing that will tell us if this is a short bounce or another up trend is going to be the Russell and whether it leads or not. So far, it's looking pretty good.

The percentage of stocks above the 50dma, here on the NYSE, had been the most reliable indicator of market health I had for a couple of years. This year it has been less clear, especially here, but is still telling us something, just exactly what is getting unclear. It broke through 55 from above, which is a bearish signal, and prompty went into freefall. It bounced today, but a lot higher than it normally would have, indicating this bounce may be a lot stronger than I think. Right now, this could go either way, and is telling us almost nothing.

Normally the same indicator on the Nasdaq would be in about the same shape, but this year they have diverged, sometimes pretty severely. This looks somewhat more bearish than the NYSE, and this move up does look like a bounce. The trouble is, this never hit the bullish territory above 70, and historically, it always peaks above 70, so it could be that this still has higher to move. Again, this really isn't conclusive.

Normally I'm either bullish or bearish in the short term, perhaps only mildly so, but I usually have some idea of where I think the market is going. Right now, I have no idea; there are way too many outside factors to deal with. I'm not neutral, just confused.

I will have the new highs update shortly.

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