Whack-A-Mole Wednesday

The much anticipated FOMC decision, which I did not read so I don’t know what was said, had very little effect on the market today, so apparently the market was expecting nothing. We are still firmly above support, and with the new pivot points for August, it looks like we will have support at 1364, resistance at 1402, and unless something dramatic happens, the month of August should be contained within that range. We have a blue bar on the Elder impulse chart, which, being the first blue bar after a series of greens, is not a concern yet.
 

What is a concern is the serious underperformance, for the last month now, of the Nasdaq. The rallies here are getting weaker, and all of a sudden, the floor has fallen out from under CMF. There is clearly something wrong here.

 The price realtive on the NYSE composite has stabilized, but is still weak, and it could go into freefall again if the market has a serious down draft here. We will have to wait and see for at least a day or two if the market has a delayed reaction to the FOMC (it frequently does), and we have the NFP potential iceberg coming on Friday. With all that, we are still in a weak up trend.

Here are the sectors ranked by RSI. To say this is a surprise is an understatement, but keep in mid RSI measures relative strength for the last 20 days.

It looks like the market has decided to rotate into XLE, which has been steadily out performing the market for over a month. I think it’s safe to say this is more than short covering. It does appear to be leveling off, but it’s too early to tell if it is running out of gas or just pausing.

XLY was a bit of a surprise in last place, since, price wise, the chart doesn’t look that bad, but price relative wise, it’s a train wreck.  This shows the same drop in CMF as the Nasdaq (and to a lesser extent, the SPX), but that started only about a week ago. It;s hard to tell if it will get support here, but it’s about the most logical place for it to bounce. If it doesn’t, we have a problem.

I didn’t expect much from the FOMC, and we got exactly not much. Bernanke’s hands are tied, both by the crisis in Europe and by the drought in the midwest. The last thing he needs is rapidly rising food prices, but that’s what he is getting. So far the market’s reaction is minimal, but we could get a delayed reaction tomorrow. Couple that with this being vacation season, and the computers are going to have a field day.

I will have the new highs update shortly.

2012-08-01 16:46:34

Source: http://samuraitrader.blogspot.com/2012/08/whack-mole-wednesday.html