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This is Called . . . A Good Start November 30, 2012

Posted by Tom in Thoughts.
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I’ve got a whole lot of writing to do over the weekend so this will be short, to the point and rather “technical”.  BTW, by Sunday night you should see my monthly newsletter posted on this site under the Newsletter tab.

A great week for the market, right ?  Yes but I’d prefer to label it as a “good start” as opposed to giving it the “all clear” sign.  Why?  because a V type bottom is unusual, very unusual and thus it’s logical to be critical of it.  The chart below calls a few items to my attention (click to enlarge):

NASADAQ

We have had a very nice, strong rally off the recent bottom (labeled SC for Selling Climax); this is the V shape.  The last two days show a price gap higher (perhaps an Island Reversal pattern?) as an Automatic Rally (labeled AR).  What is typical (if there ever is such a thing) is for a re-test of prices lower, before a presumed rally even higher (as shown by the red line).  The purpose of this reaction lower is to “flush out” those who bought in late (say Thursday or Friday).  They will take a loss.

Why I am thinking this way is the volume increases on Thursday & Friday.  Consider Volume as Supply; Supply is coming into this market.  Why?  Could it be that the “pros” are selling their inventory to the late comers at higher prices?  Could be.  What also draws my attention are the narrow range bars associated with this higher volume.  Volume coming in and prices not moving much.  Hummm.  So we’ll see what happens early next week.

Moving on:  the broader market is looking good right now, the pie chart below shows Price Strength of all stocks in the S&P 1500 Index.  “Green is good, Yellow caution and Red is weak”.

Price Strength

Next is Accumulation / Distribution or in short Money Flow.  Green (A&B) shows shares being Accumulated, Red (D&E) shows Distribution.

Accum - Distrib.

In short things are improving but don’t be surprised by a sudden down turn in prices soon.  What I’d love to see is a higher (price) swing Low point before a resumption of this rally.  Got to go . .  . things to do, but watch for the monthly newsletter.     ………  Tom  ……….

price chart courtesy of MetaStock, pie charts by www.HighGrowthInvestor.com; used with permission

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