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Concern About the Market Getting “Toppy” September 22, 2012

Posted by Tom in Thoughts.
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First off I’d like to ask those reading this to submit a comment (by clicking  ‘comment’  at the top of this post); I’d like to hear back about what your thoughts are on the content.  To ‘Technical’ (hard to understand), to ‘Elementary’ (tell me more, this is easy) or ‘Just About Right’.  I can go in either direction.  I don’t want to be over anyone’s head, but at the same time I can “geek it up” a few notches too.  Thanks for your time to let me know.

OK, back in the office and getting caught up on administrative duties but a few things caught my attention.  First of all, as you can see in the chart below, we’re into new (recent) high ground.  Well above the late March high. (click on chart to enlarge)

Nothing wrong about that but as we go higher the risk increases.  I’ve been calling for a likely correction now for a few weeks and I still have that in the back of my mind.  Yes the trend is Up, the near term (dashed line) channel is still intact, but prices are at the top of that channel.  A cause for Caution and closer monitoring of this market.  As you can see I’ve moved the Support and Resistance line up to reflect the recent market strength, these are levels to watch.  Break up through Resistance is Bullish, while breaking down through Support is Bearish.

I note that (higher) volumes at these levels show market participation and hence areas where others will be considering getting in or out.  For the time being I’m fairly well invested.  Precious Metals, Wireless, BioTech, Banks and select International sectors have been doing well.  The Small Cap Index (Russell 2000) has also shown a new spark.  Money flowing into small cap stocks is usually an indication of “risk on”.  Money Flow in general is good, though slowing down from a month ago.  This indicates (to me) the for the most part the “big guys are “in” (and have been for a while).  So who is there left to Sell to?  The market need someone to Sell to in order to go up.  If not, it will go down.  There in lies my short-term concern and my thoughts about a correction in here.

Here’s a table of the Top 10 Sectors (out of 68 total sectors).  Note that ‘RS’ means Relative Strength (to the S&P 500) and ‘A/D’ refers to Accumulation & Distribution.  Rankings are based on 0-100 or a letter grade of A-F.  ‘Vel’ is Velocity; Green is ‘Good’, Yellow is ‘Caution’, Red is ‘Down or Bad’. ‘Raw’ is a proprietary price strength measurement.

Looking forward to some comments back.  Have a good week.      …….. Tom  ………

chart courtesy of MetaStock; table of www.HighGrowthStock.com; used with permission

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