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WALL STREET CRAPS MARKET OBSERVATIONS FOR FEBRUARY 17, 2013

February 16th, 2013

MARKET OBSERVATIONS FOR FEBRUARY 17, 2013: The stock market tested its February 1st during this part week. I would expect one or two more tests of these highs (Dow 14018) in the coming 10 trading days. If we should get a short and sharp decline, it could be an opportune time to go long for a quick trip back up to the old highs. The internal breadth indicators are largely neutral and show that the market has been under a mild correction from within.

Just because the market isn’t going up, don’t assume that it has to go down. It is entirely possible that the market is simply chewing up time before continuing its march higher. And speaking of March, that is the most likely month to expect a more sustained drop in the market. Right now, there are just too many bears predicting the end to this rally. When the bears get quiet, it will probably mean that the final top of this rally is in. We may be close to that time, but I don’t think we are there quite yet.

Key market indicators show the following:

Last week, I mentioned the Long-Term Treasury Bond Fund (TLT), Gold Miners (GDX), Silver Trust (SLV), and the China ETF (FXI) as possible speculations. But based on last Friday’s action, I will resist the temptation to “catch the falling knife” and avoid these stocks until things settle down. As I stated in my book, Wall Street Craps: How to Play Today’s Hot & Cold Stock Market For Fast Money With Less Risk, “buying in a panic is just plain risky.” Most high-percentage bottom are not at points of maximum fear, but instead at points of maximum apathy.

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