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A change in sentiment\?

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Months ago, some better than expected economic data was met with selling and had many investors scratching their heads as to why stock prices were falling, while economic data was showing improvement.

In the past week, the major market averages have been somewhat volatile, but recent "bad news" and signs of economic weakness have been getting some mixed results with the major market averages gently pushing the envelope of new relative highs.

While stocks are still off their early morning highs, the major market averages have been able to battle back to unchanged levels.

Some notable new 52-week highs have Apollo Group (NASDAQ:APOL) $40.79 +4.40% and Hewitt Associates (NYSE:HEW) $28.04 +3.65%, both in Dorsey/Wright's "business products" sector.

Shares of Henry Schein (NASDAQ:HSIC) $50.80 +2.62% in the "healthcare" group make a new high after triggering the "bearish signal reversal" pattern from its point and figure chart at $44 on July 29th.

Henry Schein Chart - $1 box

While it is a little late to be playing the "bearish signal reversal" in HSIC, I've shown a chart so that both bullish and bearish traders can monitor stocks for the pattern. This is a rather "rare" pattern, but when it forms, can provide powerful upside moves. What seems to take place is that while the market internals are in a bearish phase, as depicted by the bullish %, bears continue to short rallies. The weak market internals help give way to lower lows. Then, all of a sudden, a catalyst appears or some type of "valuation" is found attractive by the bulk of market participants and demand takes over and a reversing "buy signal" is generated.

Bearish traders immediately look to cover, while bulls press the issue with their buying on some "knowledge" of further bullishness. The quick shift from supply to demand creates the powerful move higher.

Tonight, I'll be busy looking though some of www.stockcharts.com scans and their point and figure chart alerts. What I like to do is find stocks in sectors that have turned to a "bullish" phase on their sector bullish % charts, when playing bullish patterns like the bearish signal reversed. Trying to get as much MARKET, SECTOR bullishness in my favor as possible.

Other notable highs come from "retailer" Jo-Ann Stores (NYSE:JAS.B) $23.30 +6.34%, "leisure" Pixar (NASDAQ:PIXR) $47.47 +2.74% (mentioned the spread-triple-top at $45 yesterday in market monitor).

Today, we noted the "bullish triangle" pattern in drug maker Forest Labs (NYSE:FRX) $72.90 +4.9%. According to Dorsey/Wright and Associates, this group is "bull alert" at 36% bullish and sector internals are improving.

Jeff Bailey
Senior Market Technician
Option Investor

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