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The State of the Trend

Despite all the hoopla surrounding the 12th hour fiscal cliff negotiations, the markets did what they always do: swinging from overbought to oversold and back to overbought condition. As the chart below shows, market internals became oversold on December 28th and are nearing overbought levels once again:

In our last article for 2012 we surmised that as long as the SPX stays above 1390-1400, the index will most likely embark on a more sustainable trend, similar to that of December '11 - March '12, or June - September '12:

Well, the jury is still out as price is within both channels, but with mounting overhead resistance and ovebought market internals, it seems more likely that the index will continue following the 2012 channel. As long as price remains within that channel and manages to break above the 1470-1475 zone, the next immediate target level becomes 1500.

We've mentioned the OT Seasonal app several times in the past, and for those who follow seasonal analysis, cycles, and in particular the decennial cycle, here's a heads-up: if you look at the decennial cycle for years ending in 3, you'll notice that during the last 120 years of DJIA history, there have been six bullish and six bearish years. Therefore, in addition to the composite cycle it would make sense to keep an eye on the bullish and bearish year cycles, which may provide a more accurate picture of what's in store in 2013:

 

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