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Thursday, July 3, 2014

Daily update 7/3

The Dow finally closed above 17,000 for the first time.  Historically the Dow has struggled with millennial marks quite often.  Most of the time there is a pullback, but the size of the pullback varies greatly.  After crossing 16,000 last year it only pulled back to 15,703.  It then surged to 16,588 before pulling back to 15,340 in early Feb.  While they were busy imploring anybody that was not in the market that this is a great time to buy on CNBC today, that normally is not the case.  We will see if it follows the usual pattern of a pullback.  Here is the daily SPX chart.

SPX continues to extend the overbought condition.  Earnings reports start in next week.  They could have a significant affect on things.  One other chart I think we need to keep an eye on besides IWM that I mentioned last night is RTH.  Here is the daily chart.

We all know the consumer is a big part of the economy these days.  It is important for the retail sector to be doing well in order for the economy to be doing well.  RTH is still below its Nov. high.  Ever since that high it looks like it is forming a very long triangle pattern.  This can be a consolidation to go higher or a topping pattern.  We will have to see which way it ends up breaking out.  I have not really seen any commentary on this one.  I guess everybody is too busy telling me how bullish everything is to point out something that is lagging behind.  In 2007 it topped in June while SPX did not top until Oct.  We have a similar situation here.  It could be a warning sign of trouble, but until it breaks down it could always break out to the upside.  I am going to be watching both IWM and RTH closely.

The market is very overbought and the Dow just hit a new millennial mark.  Normally I would think we could expect a pullback soon.  I guess we will see what happens.

I found this quote amusing from Putting Markets Rise Into Perspective.

It is from that logical analysis that the first law of investing was written: “Buy Low – Sell High.” It has often been written, it is often spoken, unfortunately, it is rarely heeded.

Today is a perfect example of why it is hard to sell high.  They were busy on CNBC telling us how great things are and it is not too late to get in.  They were berating everybody for missing this bull market something fierce.  I actually saw someone say that market valuation was only a little above historical norms with a straight face. This is the common atmosphere that makes it difficult to even think about selling.  Today reminded me of the quote from Wall Street money manager Barton Biggs.

"'A bull market is like sex. It feels best just before it ends.'"

Both the market and sector status pages have been updated.  Have a great 4th of July to all those that it applies to.


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