Sunday, November 12, 2006

Market is Trying to Made a Top

The stock market managed a bounce out of the minor Friday sell off.  There is precious little to report this evening on the state of the market even though the next week does have some significant items such as the inflation data in the form of the CPI and PPI as well as housing starts on Friday.  

In the wake of the election the market doesn’t seem to have much to trade on, or maybe we should say that the media doesn’t know what to say.  What does the market have to say?  

As we look at the last 2-3 weeks and compare the highs on October 26th with the highs on November 8th, we see some subtle weakness in the technicals over that same period.  The first thing to notice is that the SP 500 did not make a new high along side the INDU and the NASDAQ Comp on November 8th.  

Our momentum indicators suggest the momentum high happened back on the October 26th with the price high happening on November 8th.  Obviously, the market (Dow) reserves the right to make another new high but we look at last Wednesday as being a key point.  

The biggest indicator is volume, in our opinion.  Looking at volume, it has sort of dried up on this late run to new highs.  Again, subtle weakness has appeared on this last high with the 5 day average upside volume lower than it was at the earlier high.  

We do like to see how the 5 day average new highs for the NYSE confirm the new highs and they peaked back on October 27th at 314 with the high last week being 241 which occurred on Friday, two days after the new Dow high.  

By themselves they don’t build a case to say we’re going down but collectively there is a stronger signal.  We are going to keep an eye on the market every day to see if something significant happens with regard to price.  Until then, we must wait.

Dow Industrials:  12,108.43  +5.13
VIX: 10.79
QQQQ:  43.03
RYVNX:   17.78
RYAIX:  21.96
RYCWX:  37.30
TLT:  89.86
BEGBX:  13.91

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