Another tough day for the bears (are there any left?). For the first 30 minutes of the day it looked like sellers had taken control of the market but that turned out to be a trap. The indices had dropped under the lows from late last week which surely encouraged some bears but that turned out to be a big time trap. The indices turned on a dime and shot, once again, to new highs.
The price chart of the S&P 500 continues to act well but I don’t like trend of volume lately. New highs on declining volume is a red flag:
The Nasdaq had a nice head fake lower this morning followed by a huge reversal and ramp through 2500 to close at a new multi-year high. That bullish divergence in On-Balance Volume played out nicely (if you’re long).
To follow up on Michelle’s post from earlier today, I’ve drawn a diamond on the QQQQ chart. It appears to have broken out of the diamond. The question now is can it breakout above the January high…
And here’s the Russell 2000 which was up almost 1% today vs. 0.28% for the S&P 500.
No changes
| Trend | Nasdaq | S&P 500 | Russell 2000 |
| Primary | Up | Up | Up |
| Intermediate | Up | Up | Up |
| Short-term | Up | Up | Up |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
Hi Mike,
I see the declining volume too in the SPX but the OBV line is still breaking high so I take that as being bullish.
The volume is going down because institutions are starting to diverge from retail. Look at the chart of the NYSE composite (which is highly institutionally driven) vs. the S&P 500:
http://stockcharts.com/h-sc/ui?s=$NYA&p=W&yr=2&mn=0&dy=0&id=p80890187977
The $NYA is underperforming the S&P, and the volume is dropping off as well. If institutions don’t keep up the buying then this rally won’t last…
Hey, if you drew that diamond they way you WOULD have drawn it on Feb 5, when it was first brought to our attention, you would see that it had been violated two weeks ago and escaped for good last week.
Not that I buy into the diamond pattern anyway, but your mileage may vary.
Kevin — yeah, I noticed how OBV is holding up. I just wonder if & when the volume action will make it turn down.
Prospectus — Your theory jibes with what Ian Notley said in a presentation I attended a couple of months ago. This top is taking its sweet time in playing out.
Bill — It’s so much more dramatic this way! :d