5-1-12 Close

Today looks like a stall day on the NASDAQ index which will count as distribution. Since the distribution count is high already moving from 9 to 10 days of distribution means little in the overall picture. The NASDAQ Exposure Model is still looking for a follow-through day (FTD) which would serve the purpose of zeroing the distribution count. Once the distribution count becomes full (6 days) the model begins looking for a pullback low followed by a FTD size move. If the FTD occurs on day 4 or later after the low the FTD is counted as a new B1 market buy signal. If and when this happens a two edge sword is unveiled. The low (4/23/2012) sets the rally low and the level at which an S2 sell signal is measured. Any close below that level would end the rally immediately. The other edge is if the market continues up, the zeroed distribution might allow the exposure count to expand getting us further into the market.

Tomorrow, if the lows of the NASDAQ stay above the 21-day ema we could see a B4 (Trending above the 21-day) buy signal. This would move us to +4 (90% invested). This occurs if and when the lows stay above the 21-day for five days and if the day closes positive or flat. Todays stalling however may be a significant sign leading to further weakness.

In the really big picture we are in our third year and third leg up of what looks to me as a counter trend cyclical bull market in an overall secular bear market that began in 2000. The S&P500 1550-1575 level marks secular bear market resistance. It has visited this level twice (2000, 2007). This resistance is 10% above the current price. It would be surprising to see the S&P move beyond this level +/- porosity. So I see 10% up as a possibility this year but then another bear phase or two until the market moves into cheap evaluations to launch another secular bull market as it did in 1924, 1950 and 1982. With the Fed sitting on interest rates it may be difficult to move up another 10% because of the monies locked up in the bond market but then again elections are happening all over the world this year and tightening seems out of the picture and austerity may succumb to election pressures. It is after the election victory parties are over that realization sets in that nothing has changed in a sick economy.