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Creeping Higher

Feb 13, 2013 7:45 am Print Print

This morning's report will be brief as the flu that's going around finally hit me and my family.

The market continues to creep higher; however, many leaders, like Amazon (AMZN) for example, show questionable patterns.

AMZN reacted off our presumed 284 square-out and is backtesting its 50 dma.

Note the picture-perfect rebound off the 50 dma in late December and the slingshot higher.

This go-round at the 50 is not such a free lunch for AMZN bulls. It may just be the Rule of Alternation (with the current pullback to the 50 being more of a W pattern than a V) and if AMZN turns up convincingly, it could be a tell for the market -- at least in the short-term.

Alternatively, an authoritative break of the 50 dma may indicate profit taking in this leader which could spill over into the broad market.

That said, in January, the talented Mr. Market did a marvelous job of shaking off the Apple (AAPL) turnover.

But AMZN has had a high degree of correlation to the market of late. To wit, the September to November decline in AMZN was mirrored precisely by the popular indices.

An hourly SPY from the November 16 low shows a well-defined channel with a mid-channel knifing through the Gap 'N Go at the beginning of January.

The lower Gap Window ties to what looks like a mid-point of the advance off the November lows.

The action shows 3 little drives into the upper rail of the channel since what set up like a good turning point during the week of February 4.

At that time, the DJIA scored a close over 14,000.

Yesterday, we got a second close over 14,000.

Whether the second mouse gets the cheese or we get another roll-over remains to be seen; however any momentum past the first hour today suggests there is an agenda higher into Friday's monthly option expiration.

Perhaps the SPY will overthrow the upper rail of the current hourly channel, satisfying 1547 cash on Friday, which will be 1547 calendar days from the November 21, 2008 crash low for a big square-out.

Turning to GLD, a little Rule of 4 Sell has been triggered on violating triple bottoms from December.

The break came on a gap and GLD remains in a theoretically weak position.

However, the monthly GLD is still is a potentially quite strong position indicating the break on the dailies may be a 'final flush'. Of course, calling a final flush can be like trying to catch falling knives.

Be that as it may, GLD is still in a monthly Plus One/Minus Two buy position. Why? The 3-Month Chart is pointing up and GLD shows two consecutive lower monthly lows into December.

Since December, GLD has carved out two inside months which may be what Gann referred to as two periods of time on the side which can either be distribution or accumulation. Since GLD has been trending down since last September, the presumption is this is an accumulation pattern.

That said, looking at the dailies, it is possible a larger 'clean-out' plays out satisfying a 3rd drive down from last September's high. Note the first drive down into an early November low and a second drive down into late December low.

As you recal,l I have been looking for a major turning point in gold/GLD for February. My presumption has been that a low is being formed as opposed to an accelerated decline.

If GLD can hold the December low, even though it may undercut the January low, it will be in the "Crouch" position. A subsequent turn up of the monthlies would trigger a potentially explosive buy signal.

If GLD fails to follow through from the recent downside gap and instead leaves an upside gap, we could have an Island Bottom. Upside follow-through that recaptures the 50 and 200 dma's is a bullish indication which when combined with the monthly "Crouch" pattern should define the cycle low I've been contemplating here, 540 degrees (18 months) from the all-time high.

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