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(LAST WEEK) The TO is declining, but it is also at support. If support holds, the result will be a reversal to the upside next week. (THIS WEEK) We got the reversal, and the TO is rising which is supportive of higher prices.
Last week we said, "We observed a deterioration in the internals which means the indices may have reached a short-term top. Notice that the McClellan Oscillators are about to test the zero line. If they fail, the failure would provide confirmation of the short-term top. We are overall neutral going into next week but with a modest negative bias. However, we must look out for a reversal to the upside towards the middle of the week if our indicators find support at their rising bottoms line." This week at the last minute, the indices were able to snatch victory from the jaws of defeat while most indicators either overcame resistance at the zero line, or found support at their rising bottoms line, which in the short-term tends to be supportive of higher prices. At the moment the path of least resistance is to the upside and we ought to expect higher prices. Having said that, we also want to state that we view the current move "terminal" due to the form of its origination. Upside break-outs accompanied by divergences that we have witnessed over the past two months tend to be the "end of something" instead of being the "beginning of something." Also please read "Gold and Momentum Stocks." Ike Iossif
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