There’s been a ton of hype the last few weeks about this great rally we’re having. Well guess what… the Dow and S&P 500 are exactly where they were on June 4th. Yes, the NASDAQ has shot higher, but I have my suspicions about the real reason for that (a short squeeze). Anyway, it still appears to me that the Dow and S&P 500 are making topping patterns. I’m seeing possible head & shoulders patterns on both indices. I’ve been trying to decide between two volume indicators, On Balance Volume (OBV) and Worden’s proprietary Time Segmented Volume (TSV). TSV is showing a serious bearish divergence on all the major indices, while OBV looks strong on the indices. We’ll see which indicator is right.
The NASDAQ has made an evening star like pattern, but it’s still clearly in an uptrend. The other index of note is the SOX, which has that same bearish TSV divergence, failed at the 400 level I mentioned the other day. And speaking of round numbers, which are often significant resistance/support, the S&P is back below 1,000 and the Dow bounced off of 9,000 again.
Here are some charts:
In all of these charts the aforementioned volume indicators are in the lower panel. OBV is green, and TSV is yellow.
The S&P 500:
The NASDAQ:
The SOX:
I wanna try a positive spin on this on ya (ugh – I feel glib, bullish sentiment creeping up on me!). If the market HAD rallied from that June high to even higher highs wouldn’t we be saying that the market is now x-times over-valued and/or over-extended? After all, we complained back then about the market being over-extended, a higher high since then would simply make us even more unhappy. The market had every reason to begin a deep correction from that June high, and it didn’t. Instead, it has consolidated and come right back. Certainly, if these recent attempts to break those highs fails (good job Nazz), we will be vulnerable to big losses. But what IF we do finally break to new highs again? Are we *happier* THEN? I doubt it. More unhappiness all over again. It is less clear to me now what kind of dip in the general markets WOULD make us happy (vs vindicated and afraid of further declines). I do know that there are some unmistakably good moves still on-going in individual names, and those make for some interesting places to take a pulse on future prospects.