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Thursday, October 17, 2013

Back To Business As Usual

Another exercise in can kicking got the desired result: a rally an a new high )or, as I'm sure you've already heard a million times, all time high).  Be that as it may, it is now apparent that we are in the midst of a confirmed up trend, the target of which is now the R2 pivot point. Once again volume is a thorn in the side, and it could be a warning of a potential bull trap, but if you had been overly cautious every time we went up on delcining volume, you would have missed most of this year. 2013 is not a year that will go down as "typical" for the stock market, and I would not be surprised to see us move higher on even crappier earnings than we has last quarter. I would also not be surprised, however, to see this suddenly reverse and beging a very nasty drop; the timing of that is going to be very tricky, but I am 99% convinced the day of reckoning is coming.
The Nasdaq 100 is in the same shape, which is bad news, since this is, for the time being, giving up leadership. That may only be temporary, but if it gets drawn out, we could see leadership shifting toward the energy and commodity areas, which would probably be the last gasp of the bull market.

The Russell 2000 also seems to be giving up some leadership, but is still in good shape, and could resume at any time. For the immediate future (the next week), I see little reason to be concerned; longer term, this market is going to be running on fumes. Massive deficit spending and money printing is good for only so much up side to the market; exactly how much, and when it stops, is unknown.

One clue we can get is from the percentage of stocks above the 50dma on the NYSE. his is returning to more normal behavior after being severely distorted in May and June. It is now in firm bullish territory, and is very close to the area it normally peaks. In a normal market, once this peaks, we have about a month of upside left, on narrowing leadership, before the market rolls over. According to this indicator, we are almost there.
The same indicator in the Nasdaq, which at this point I would consider slightly more reliable, is not quite there: it just crossed the bullish threshold, and normally peaks in the high 70s-low 80s. At this rate we will probably get there in about a week.

Well, the default crisis is now behind us, thanks to the Republicans who faded into the sunset, and now we wait for the next manufactured crisis. In the meantime, the looting continues.

I will have the new highs update shortly.

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