Do Androids Dream of Electric Sheep?

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We have many different indicators we use to help us “see” market signs before they become super obvious-like telling folks the market is failing after it fails kinda thing.

Tuesday night, I wrote about 7 theories that could potentially have an impact on what happens from here. One theory I eluded to without much detail was “an anemic advanced/declined indicator, not to mention concerns on a market running rich.”

Back in September, as the S&P 500 made new highs, the Advanced/Decline signal went to warning (when the number of stocks above the 10, 50 , and 200 Day Moving Averages go from plus 400 to under 400 in both the 10 and 50 DMA. That is what we consider a warning.) In September, it took another couple of weeks to see the S&P come off before its dramatic sell off mid-October.

One distinct difference though, could be the IWM or Russell 2000s. In September, they peaked and reversed, never taking out that peak high, then deteriorating long before the other indices did. If that does not happen and we instead see IWM continue to clear, hold and trade above that September high (117.80), perhaps the warning is no more than that-more of a point when we consider time of year as not one to push too much yet, certainly no reason to expect the market to cave.

I would expect any major hedge funds that are up for this year to begin to even up and take it easy as to not rock the profit sharing boat, regardless of what happens in the last 6 weeks of this year. Can you believe it? This year will be over before we know it. No more Year of the Horse as we look forward to The Year of the Sheep. (Or as Robin Williams once repeated, “A time when men are men and sheep are nervous!”)

S&P 500 (SPY) 203.45 a good point to hold now with some expected sideways movement.

Russell 2000 (IWM) Beautiful bullish engulfing pattern and a close over 117.80-has to hold up

Dow (DIA) 175 good pivotal point of support to watch

Nasdaq (QQQ) New highs (multi-year)

XLF (Financials) A possible reversal candle but not that clean since this is holding the 10 DMA at 24.00

KRE (Regional Banks) Timing is everything and I have been writing about regional banks as the next hot thing over the big banks-today looked right

SMH (Semiconductors) Semis are not needed at this party, but, still like to see them clear 52.00

IYT (Transportation) Been a strong group-still is

IBB (Biotechnology) Held where it needed to

XRT (Retail) After 2 inside days-blast off to new highs for this ETF

IYR (Real Estate) 75.00 support

ITB (US Home Construction) Inside day so looks like more upside is possible

GLD (Gold Trust) Inside day so still looking for 113.15 and over

USO (US Oil Fund) Inside day and 30.00 key point to clear if going to hold

OIH (Oil Services) Still could be bottoming

XLE (Energy) 86.25 key support with 88.61 the 50 DMA to clear

XOP (Oil and Gas Exploration) Over 62.00 different picture

FCG (First Trust ISE Reserve NatGas) Over 15.75 much better

TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs 120 pivotal area and the 50 DMA to hold 117.75

UUP (Dollar Bull) Strong dollar, strong retail-that’s a relationship that finally is catching up to itself