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Wednesday, October 16, 2013

Deadline Derby

It looks like a deal might be in the making, although that should not come as a surprise, since nobody wants to be tagged as the one who caused a default, but despite the fluid news environment, the market is doing just about what can be technically expected. Volume finally picked up on the way up today (likely enough to call this a follow through day), and we are now on a valid buy signal, so we are in bullish mode again. However, we are also up against what could be a tough boundary to cross, the R1 pivot point. If we do get through it, I think we can expect a pretty powerful rally, but a failure could also send us down to the P pivot point or worse. The market isn't offering a lot of clues about which way it is leaning, but one thing that bothers me is that CMF is barely moving, and is in a long term down trend. While I'm not seeing much in the way of accumulation, I am not seeing selling into strength, either, and if this was a bounce before another down move, I would expect to see it.

The Nasdaq is also right at the R1 pivot point, and tomorrow we will know if this is going to break out or break down. We now have a reversal of trend in the price relative line, which is not a good sign if we are expecting a good rally here; while we may be seeing some rotation, I suspect we are more likely seeing overall  weakening.

We are almost in the same position on the NYSE composite, just a little more room here, but still close to resistance. One thing that I notice, nit just here but in the others, is tha we have finally gotten back to the level where we were after the last FOMC decision, when we were told that a rally was a "can't miss". That is why I don't pay much attention to the experts.

TickerRelative Strength Index (14)

Here are the sectors ranked by RSI. XLE has moved up despite a drop in oil prices; that was not a surprise, as I have been seeing oil exploration and drilling stocks moving u for a couple of weeks now. We have no sectors above 70, which means we are nowhere near overbought, so we still have some room to move up.

XLE represeents the big caps in the energy sector, which are now catching up to what the small caps have been doing for a couple of weeks. Oil hasn;t been moving up, so why these are so strong right now is a mystery: somebody may be anticipating a problem sometime in the near future.

XLU has dropped into last place, although price wise it has been about even for the last week. Normally a lagging XLU is a sign of a bull move, and that is what we have had for the last few days, and unless something changes, could very well see more of in the next few days.

We are likely to have a news event tomorrow which si a market mover, but whether the market moves on it or not is another matter. So far the market has been only mildly affected by what is going on in Washington; instead, it has been testing pivot points. We will likely get a test tomorrow, and either get a breakout or break down.

I will have the new highs update shortly.

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