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Wednesday, April 10, 2013

Daily update 4/10

SPX makes a new all time high.  I am sure that will be in the news a lot.  I have suspected that would happen ever since the Dow did it, but it sure took a while.  Here is the daily SPX chart.

SPX has a blue bar meaning it closed above the upper Bollinger band and is extended.  It also closed back above the upper red trend line it has been struggling to get above.  Volume increased over yesterday, but it was not real high.  There were 306 new highs which was below the peaks we have seen so far this year.  There could have been quite a few shorts built up over the last few weeks as the market stalled.  That could have been the reason for the market to fly up at the open as they ran for cover.  Lets zoom in to the 195 minute SSO chart.

There is a blue bar on this time frame also.  SSO did get back into the price channel yet again.  I think the more important line here for bulls is the red line.  If we get back below that then the break out over the short term double top failed.  That would also put SPX back below its 2007 high of 1576 which would also be a failed break out.
The question now is will the break out to new highs hold.  I think it is going to be tough, but we will see.  Here are some problems.  SPX is almost 10% above its daily 200 SMA and it just made a new all time high from 6 years ago.  The bulls are asking people to buy a new high in a very extended market.  It has been a very long time since we have had even a 5% pullback.  Everybody is aware of the old saying sell in May and go away.  Well we are almost there now.  For the last three years the market has topped between April 1 and May 2 and corrected roughly 15%, 20%, and 10% from those highs.  To buy here and now you have to feel like it will be different this year.  We are likely in a global recession and earnings have already been contracting for the last 2 quarters.  After strong first quarters there is a history of sizable corrections in the second quarter.  In order to stay here and move higher the market will  need buyers to be more aggressive then sellers.  I believe a lot of people thought we would get to new highs and held on for that event.  I think there will be some profit takers now.  Will there be enough new buyers to hold prices up?  I have my doubts, but I guess we will see.  It might take a few days to sort things out as some mom and pop investors hear the news and pile in. 


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