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Tuesday Stock Market and ETF Outlook: Is This for Real? (DIA, SPY)

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Daily ETF and Stock Market Outlook for Tuesday, September 21, 2010 from Wall Street Sector Selector

Instratrader Indicators:
 
Yellow Flag: Choppy Prices Ahead 
Daily Technical Sentiment Indicators: Optimistic (Bearish)
Short Term Market Condition:  Overbought (short term bearish) 
Short Term Trend: Up 
Medium Term Trend: Up
Long Term Trend: Down 
 
Commentary:
 
Today was a huge short covering rally on very little news, other than the “recession ended” more than a year ago.
 
The NAHB homebuilders’ index remained mired at recent lows and bond spreads in Ireland and Portugal continue hitting records as that market worries about sovereign debt problems.
 
Today the Fed conducted a huge POMO action, buying back $5 Billion in assets which likely contributed to today’s surge. 
 
Now the question is, “is this for real or is this a trap?”
 
Investor sentiment is wildly bullish and markets are at overbought extremes which are decidedly bearish, but key levels were taken out today which, if held, would be bullish with next resistance at 1155-1160 on the S&P 500.
 
Extremes like we’re currently seeing are very reliable indicators of an impending decline and so we’ll soon see if that will be true in this case or not.
Disclosure: SH, SEF, EFZ, VXX, SPY Put Option

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