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WALL STREET CRAPS STOCK MARKET OBSERVATIONS FOR January 21, 2014

January 21st, 2014

craps front coverSTOCK MARKET OBSERVATIONS FOR January 21, 2014: The stock market appears to be on the last leg up of its long bullish trend. The rally of the past week has been narrow in breadth which suggests that the next closing high for the Dow Jones Industrial Average will be its last. Look for strength during this coming week as an opportunity to sell or even go short as a speculation. The overly bullish sentiment of the past few months has set the market up for a possible fall of some significance. If anything, this is not a time to add to new long equity positions.

Key underlying market indicators show the following

My advice for traders and investors is to remain of the sidelines and let the market set itself up for a possible top in the near term. The majority of internal indicators have  moved into neutral readings while the Dow looks like it wants to challenge the old highs. This is usually a sign of an important top and something that investors want to avoid being long equities. Instead, this is one of those times where being in cash is probably the wisest place to be for now.

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Note: The behavior of a big Dow stock like General Electric since the last day of 2013 suggests that it needs to correct back to its 200-day moving average.

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