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Thursday, October 15, 2009

SPX says "Pass Me the Binaca!"

First, here is the EOD count. And yet another triangle to extended sideways today with no meaningful pullback --- TRIANGLE!! (shaking his fist)

But another interesting upshot of this is that it shifts up the final wave's channel lines. We will come back to this.

Next lets look at some breadth. Refer to last night's post (Man SPX, Your Brea(d)th Stinks!).

Wow, talk about stinky. What did you eat, some Limburger? Let me guess, you went down to Gordon-Biersch and had a huge plate of garlic fries (which are awesome, BTW) followed by some raw onions?

Because brea(d)th this bad (<1) on a new high? You gave to be joking, SPX, come on.

INDU and SPX = new highs. NDX, COMPQ and RUT? Nope.

So lets get back to the topic of divergences and price action. The VIX divergence yesterday was bogus. It made a new low today as *some* of the markets made a new high. So +1 for the bulls. ... However, The NYAD (NYSE official Advance/Decline) was essentially flat (up 0.11%) while the the SPX was up 0.41% and the Dow was up 0.47%. While not technically a divergence, you can see on the chart below the NYAD has been leading the rally up (orange line on the chart background). Also this rally has had no pullback greater than 50% for the last 10 trading days (most have been 24% or 38%), despite the decreasing breadth. Couple that with about 5 large exhaustion gaps. Oh, and the daily RSI is testing the downtrend line for a third time with negative divergence.

I don't know about you, but I would expect a technically weak blowoff to behave in exactly the same fashion. Not saying it is one, just saying it has a lot of the earmarks.

Weak breadth, with unimpressive volume. I don't think anybody can rightly argue (and be taken seriously) that this particular wave, the one in which we are making new highs in the middle of Q3 earnings season, has strong internals.

I am not saying this is the top, I am not saying it is not. I am just asking you to ask yourself: If the bulls are still driving this rally, wouldn't we expect a better move in the face of this "good news". Wouldn't the internals be stronger as we made new highs, not weaker?.

Just a question.
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