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Reading the tape

xlf daily 10.26.09

We have been mentioning for the last couple of weeks how the markets have been making 52week highs as more and more stocks make 52weeks high as well. What we have been noticing is the start of possible distribution at these levels. In at least two days recently when the markets have started in strong positive territory, they have finished negative for the day. That is usually an indication of distribution, but before we start locking up our DOW 10,000 caps we need to get some confirmation that we have indeed broken the uptrend that we started in March of this year. One indicator I am looking at is the relationship between the XLF (financial ETF) and the SPY (S&P ETF); during the late September break in the XLF, it pierced the 50day MA and the same time that the SPY was testing its 50da MA.

This time around the XLF is once again testing its 50day MA while the SPY is only testing its 20day MA, what will be important is monitor this relationship to see if the financial sector confirms the break of the 50day MA and if that leads the SPY lower. For now we need to read the tape and be prepared for anything.

SPY daily 10.26.09

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