Industry Update January 21, 2011

Write-up by Jeffrey Webster

It was a tale of two markets this week: Hunting at the Dow Jones Industrials anything was fine. Other than a minor jog down on Thursday when the Dow dropped to a small underneath 11745, it was smooth sailing all the way. The Nasdaq on the other hand fell fairly noticeably, from a substantial of 2755.30 last Friday down to a minimal of 2686.59 on Thursday, for a 2.5 percentage decline. In itself the Nasdaq decline is nothing at all for the background books of course, but the truth that there is such a divergence in between the Nasdaq and the Dow is often a sign of weakness in the market as it suggests the far more forward-hunting stocks of the Nasdaq are being overlooked by the market in favor of safer, far more established issues. This is borne out by the Nasdaq/Dow ratio which has plunged rapidly by way of the moving common and induced a dramatic decline in the RSI. Sentiment, not surprisingly, is in disaster mode. Nine out of fourteen sentiment indicators are on market signals, and three of them are on optimum sells. Not a very good sign. The only very good news for bulls is that the Rydex Ratio and NFIB Small Organization Optimism index are optimistic, though neither is on a powerful signal. Total this leaves us with a decisively bearish outlook from the sentiment department. The Breadth Trend category is also showing us several indicators of problems. The Bullish % Nasdaq is on a offer. And the NUSAMA technique is presently on the highest feasible adverse score. The only comparatively great news here is the NYSE Bullish Percentage which is neutral. Trend is in far better form, however, even with the downturn in the Nasdaq. The reality is that this has only turned the every day indicators. The weekly and month to month degree indicators stay positive across the board. Also the ADX measures have not been impacted. As far as seasonality, we are rapidly approaching February now which is traditionally a great deal much more bearish than the preceding three months. Nonetheless seasonality is still good right now, in portion due to the fact we are in a a lot more bullish 12 months according to the Decennial and Presidential cycles.

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