The bulls are in control until proved otherwise

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Assume That the Bulls Are In Control Until Proved Otherwise
by Robert W. Colby

From Trader Planet Today

Industrial stock sector Relative Strength Ratio (XLI/SPY) rose above 5-month highs on 10/6/10 and remains bullish. Absolute price also rose above 5-month highs on 10/6/10 and remains bullish.

Materials stock sector Relative Strength Ratio (XLB/SPY) crossed back above its rising 50-day SMA on 10/6/10, thereby turning bullish again. Absolute price rose above 5-month highs on 10/6/10 and remains bullish.

Health Care stock sector Relative Strength Ratio (XLV/SPY) fell below 1-month lows on 10/6/10 and remains bearish, as it has been most of the time since peaking on 2/23/09.

Foreign Stocks ETF (EFA) Relative Strength Ratio (EFA/SPY) rose above 8-month highs on 10/6/10 and remains bullish, with the rising 50-day SMA above the falling 200-day SMA. Absolute price rose above 5-month highs.

Crude Oil nearest futures contract rose above 8-week highs on 10/6/10, again confirming a bullish trend for the short term.

Gold nearest futures contract rose above previous all-time highs again on 10/6/10.

Silver/Gold Ratio rose further above 11-month highs on 10/6/10, again confirming a bullish trend. Silver has outperformed Gold significantly since 8/20/10.

Copper nearest futures contract price rose above 2-year highs on 10/6/10, confirming a major uptrend. Strength in Copper suggests confidence about prospects for the world economy.

U.S. Treasury Bond nearest futures contract price rose above 4-day highs on 10/6/10 and rose above 4-week highs on 9/28/10. The short-term trend appears to be up.

The U.S. dollar nearest futures contract price fell below 9-month lows on 10/6/10, again confirming a bearish trend for the short term and intermediate term.

S&P 500 Composite (SPX, 1,159.97) consolidated gains on Wednesday 10/6/10, easing lower by just 0.78 points or 0.07%. Volume slowed, which is typical of mild consolidation. Although some of the technical momentum indicators have not confirmed Tuesday’s 5-month high in the SPX, nevertheless, it seems clear that the absolute price of SPX is in a 5-week uptrend. Since actual price is the most important technical indicator, we assume that the bulls are in control until proved otherwise. The stock market’s reaction to Initial Claims at 8:30 a.m. on Thursday and Nonfarm Payrolls at 8:30 a.m. on Friday could offer additional clues as to underlying strength for the near term.

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