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At The Peak . . . Now What ? November 1, 2013

Posted by Tom in Thoughts.
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We’ve had a rather good October, making a substantial recover from a dip.  We remain at the top of the price channel that’s nearly a year old.  On top of that I’m seeing volume peaks coming into the market (a.k.a. supply; circled in green) and the daily bar spreads narrowing (also circled in green).  Looks like that selling supply is being absorbed by the buyers in a tight price range.

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OK, so far, so good.  But the real question is what’s next.  Trouble if the buyers stop buying or maybe continued new highs if the sellers are wrong.  This market needs a catalyst to move it one way or the other, and I think it could go either way.  A news item or a major business / earnings bell weather that flops could do it.  Earnings are coming in and they are basically “OK”, so I’m not expecting a “happy days are here again” push by corporate earnings.

What also is interesting is that small cap stocks are behaving weaker than the large cap; a sign of “risk off”?  Could be.  As you can tell, I’m getting nervous here.  I feel that there is more risk to the down side that to the up.  A correction to the 3820 level or so would not be a big deal nor out of the question, but I wouldn’t expect to see much more than that.  If buying comes in at that level then we’re off to the races and back on track.

The wild card out there (pun intended) are the wild politicians.  It seems that we haven’t heard the end of their juxtapositioning in the arena.  A few comments could upset the apple cart.  So, let’s keep an eye open for a wide-spread down bar on volume.  That would indicate the folks are headed for the exits.  Just a little hedging (if you know how) might be a good idea too.

That’s it for now.  By Sunday check back for my monthly newsletter located under the ‘newsletter’ tab above.  It will contain more charts, graphs and tables.  Until then, Cheers and Good Trading.             ………  Tom  ………..

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