Churning

Markets have made little progress over the last 3 weeks, but watching the financial channels you might think they are considerably higher than they are. On Friday 11/13 the Qs closed at 44.01. Today they closed at 44.07. While the action has been frustrating, I haven't yet relinquished my half short index positions. The signs of an imminent top are everywhere. The chart above shows the absolute breadth index in Telechart. It has been a reliable indicator of turning points at extreme levels and is rapidly approaching levels that have marked turning points during 2009. Nevertheless, a solid breakout above today's high will force me to exit.

Meanwhile, the DGP, selected gold stocks, OIL, and a few other miscellaneous long positions have more than offset the index short positions in my account. Gold may be approaching some near term resistance at 1246, but I have a revised target at 1297. Oil is still holding well above the critical level of 68.32, and appears to be setting up for its next move higher even if oil inventories are rising.

As Kevin Haggerty is fond of calling them, the generals, the big money players, seem to be doing everything possible to hold this market up until the end of the year, which makes it more likely that any selling will take place after the new year. With Investors Intelligence Bears now down at 17.6%, traders should be on guard for downside risk rather than chasing year end gains.