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Tuesday, March 5, 2013

Daily update 3/5

The Dow closes at a new all time high.  That should make for some good headlines!  The important question is are we headed a lot higher from here.  Lets start with the SPX daily chart.

This chart cracked me up when I looked at it today.  Somehow in a totally random market SPX hit my expanding pattern upper trend line and stopped.  I doubt very many people are actually looking at that line.  I always find it interesting how the market does stuff like that.  SPX closed with a blue bar so it above the upper Bollinger band and is extended.  The last time we had a blue bar, SPX had that sharp pullback.  Volume increased over yesterday, but was not especially high.  Over the last month the biggest volume bars are red.  This chart is showing some distribution I think.  Lets zoom in to the SPY 195 minute chart.

The first bar volume was pretty low compared to the last two big green volume bars.  That suggests there were not a lot of shorts covering on the gap up this morning.  SPY is back in the channel again.  Notice it dropped out in late Dec., but climbed back up in Jan. and stayed there.  Is it back in the channel to stay?  There was also a blue bar this morning so price was extended on this time frame as well as the daily.  Lets look at the new high chart.

We had over 430 new highs today.  Was today another buying climax?  The volume was not all that high so hard to say.   Next is probably the most important chart to watch to see what happens.

The COMPX broke out above its Sept. high for the second time.  SPX has hung around 1515 for five weeks waiting for the COMPX to follow it higher.  This index has been what was holding up the upgrade of the intermediate trend to long.  The question is will this index stay up here or not.  This looks like a cup and handle continuation pattern.  When those fail they can fail big.  It is very important for bulls that the COMPX stays broken out.  I do not like the volume pattern in this chart at all.  It has been red bar dominant since Oct. and today's break out was not on heavy volume.  If this was just a plain stock I would say the odds of a break out failure were pretty high.  This next chart may be important also.

The Russell 2000 did not quite make a new high close today.   We will have to see if it does so in the next few days. 

SPX is still within the confines of a possible broadening top pattern.  It is also showing some distribution.
The COMPX chart, while breaking out to new highs, has a terrible volume pattern. The new highs are a little suspect.  I saw this interesting story Source.

Sausalito, CA — March 4, 2013 — TrimTabs Investment Research reported today that $55.1 billion poured into global equity mutual funds and exchange-traded funds in January and February, the biggest two-month inflow on record.

So people have loaded up on margin and piled money into equity funds over the last two months like never before.  I guess the market is going up and everybody is going to get rich.  Maybe for the first time in history people piling into the market at all time highs will actually be a smart thing to do.

If SPX falls back below 1530 it would signal a failed break out.  With the broadening top formation a break out failure could be pretty negative.  The COMPX needs to stay above 3196.  With its poor volume pattern this is probably the most important chart to watch.  I don't see the broad market going much higher without it.


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