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Friday, July 12, 2013

Daily update 7/12

Another smidgen higher today.  Here is the daily SPX chart.

SPX closed right at the red lower channel line.  Not much to say about today.  We are still extended and testing a prior high.  That makes the odds of a pullback or consolidation very high.  Check out the Nova/Ursa chart from yesterday.

People are believing in the rally and piling in like no tomorrow.  That is now two spikes above the highs of the last year.  Are they too late to the party or will they be rewarded with a big move up?  I guess time will tell.  I would just remind people of the saying "sell in May and go away".  That saying is backed up by research unlike many things you hear coming from Wall Street.  The reason is that market break outs from June to Sept. have an extremely high failure rate.  Just think back to last year.  The break out of the spring high ran up a little then fell back into Nov.  Buying the break out was only profitable if you sold before the market corrected.  History is littered with break outs in July and Aug. that failed.  Whether this one is different or not remains to be seen.  Without a significant pick up in market internals this one is doomed to failure.  At the moment the market is nowhere near as strong as it was late last summer as it was breaking out of the spring high. 

In the short term the breadth on the rally was very strong.  That usually means a pullback should be bought for a retest of the high where ever that high is.  If this market just keeps plowing higher all through next week it would be a sign of immense strength.  That seems unlikely to me, but you never know.

Chart practice has been updated with VTR the stock today.

Have a great weekend all.


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