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Tuesday, October 12, 2010

Tuesday, After the Close, updates!!!

The Dollar is showing more signs of life today, and finally broke out of the short-term tight, channel that it has been respecting for the last couple of months. The most encouraging sign is the 5/35 histo-gram, which has been trending up, is very close to signaling a buy, as it goes positive. The RSI, and STO have already bottomed, and rolled over to a buy signal from extreme readings. This is another reason why I believe the equities are building a top. It is highly probable that once the Dollar turns, the equities will follow suit.
This chart shows how Breadth has been declining during this rally, just another sign momentum is waning!!!
The SPX broke up and out of the short-term trendline and made a challenge of the last major high at 1173.57, which was rejected. Short-term that was one point for the bulls, however, this all happened on VERY weak market internals, breadth was only 1.28:1, advancers with 914B shares traded on the NYSE, LOW volume. I would sound a lot more bullish if breadth and volume was above average because that would be a sign that this rally has legs, unfortunately, this move only suggests to me we are building a top. I have seen some bullish Elliott Wave counts floating around the Internet where they have the SPX in a iii of 3 wave up from the low of 1010.91, I just cannot buy that because of the breadth and volume numbers, momentum is going the wrong direction for a 3rd wave up. If is was a 3rd wave up, volume should be INCREASING, along with breadth, not waning. I feel perfectly comfortable staying in a neutral stance right now, and when they market does give a strong buy/sell signal, then I will commit to a trade. Since September 20th, the SPX has only gained 24 points, in 17 trading days, this is not much reward as the SPX can easily shed that many points in a large gap down open!!!
Anyway, the short-term trend does remain up as the SPX made another higher high, and is close to breaking above the 1173.57 level, which opens the door for a test of the highs, on the downside the SPX has its first minor low at 1155.71, which would be next resistance, and open to door to a short-term trend change.
The VIX did back-test the trendline and then closed this morning gap, invalidating the inverse island formation, and is in a free-fall once again.

1 comment:

  1. HI Michael
    SHOCK will hit bulls like a sledge hammer
    Let me know when you want to chat.
    Im online every day from 8am to 9:30