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Wednesday, January 30, 2013

Investors Should Welcome a Correction

 All of the major indices are now overbought on a near-term basis


Trade of the Day Chart Key
Note that the small-cap Russell 2000 and S&P Midcap 400 index (not shown) have blasted to new all-time high territory.
However, the S&P 500 and the Dow Jones Industrial Average (not shown) have yet to break to all-time highs. But the S&P 500 is just 68 points from a new all-time high and 44 points from its 2000 high.
The daily chart of the S&P 500 indicates that the former resistance line at 1,474 is now a very significant support line. MACD is still bullish but overbought, as are all of the major indices. 
Conclusion: The small-cap and midcap indices have led the way higher while the more conservative indices have lagged. All of the major indices are now overbought on a near-term basis, but longer term, momentum indicates that virtually all will ultimately move into new high ground. A correction would be welcome since it would provide an opportunity to jump aboard at prices that are not so extended. ...

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