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Thursday, November 1, 2012

Daily update 11/1

Its about time.  As I theorized yesterday the market did decide on direction today.  We broke out of a four day consolidation pattern to the upside.  I hope some of you took advantage of that this morning.  Here is the day chart.

The short term trend is now neutral.  The SPX chart shows a slight increase in volume today, but the SPY daily chart shows a slight decrease.  I think this indicates there was more short covering then actual new longs.  We stopped right at the upper green line around mid day and consolidated there all afternoon.  That line proved to be resistance today, but I don't think it will be significant.  The last three presidential elections saw the market rally into election day.  In 2000 and 2008, the market sold off after the election.  In 2004, the market continued higher after.  In 2004, we were clearly in a bull market.  The other two instances occurred during bear markets.  In 2000, most people had no idea we were in a bear market though.  I think we are likely to continue up until election day.  We will have to see what happens afterwards.  My suspicion is that we will end up selling off no matter who wins.  Lets zoom in to the 130 minute SPY chart.

The first thing that jumps out at me is the difference in the volume pattern from late Sept.  The last pullback before the FED meeting had big volume bars as the rally got started.  That is noticeably absent today.  We will have to see if any significant volume comes in or not if the rally continues.  Lets take a peek at the 60 minute chart.

SPY is clearly above its 50 SMA now.  As long as we stay above that line I would give the bulls the benefit of the doubt until election day and look to buy dips.  This kind of pattern does not lend itself to determine good upside targets.  Price action was very choppy and there are no downside gaps to fill.  Any target would be nothing but a guess and I don't like to guess.  We do need to close above today's high so we can eliminate today being a one day wonder.  That seems likely to happen to me.

The short term trend is now changed to neutral.  A close above today's high will give that trend an upside bias.


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