SNIP: SOX is a real anchor chain, hole in the boat, or any other high school coaching clich you want to apply. After peaking in January it is in the process of making a lower high right at 535, the November to December peak. SOX hit 535 on the Thursday rush higher and then reversed. That is a head and shoulders in the making. Oh, it closed below the 50 day MVA (516) once again, a quick trip back to this realm. The 18 day MVA is ready to cross down through the 50 day as well; when that happens and holds, that is a pretty significant sign of further selling ahead. It has not done it yet, and until it does it is simply something to watch.
With NASDAQ and SOX showing signs of fatigue and lethargy, can SP500 and DJ30 continue to hold up? NASDAQ has been the key to the market rally, and though some continue to lament the failure of dividend stocks and large caps to take over the action and predict that the change will come, NASDAQ remains the key to the action. Remember back in the mid 1990's when the lament was how small caps were being ignored and only a narrow range of NASDAQ large caps were gaining? The point: no matter what part of the market is performing or not performing, someone is going to complain about it. If this market is going to continue to expand, it is going to be the growth stocks that do the heavy lifting as they always do. When a market falls back to relying on limited growth, high dividend paying stocks, the market is on its last leg.
One area we have been watching, while not a primary indicator, is the advance/decline ratios combined with the new high/new low ratios. The A/D line for NASDAQ and particularly NASDAQ 100 are making lower highs and lower lows. The new highs/new lows ratio is also weakening. These are not primary indicators; they show possible 'erosion' of the action. They are in line with the weaker price/volume action on NASDAQ as well as NASDAQ's recent propensity to hang out at the 50 day MVA. Stay in a bad neighborhood long enough and bad things can happen.
SNIP again SOX could, as it often is, be the key. Chips are in just about everything now, and if SOX cannot hold up but rolls over in its forming bearish pattern, then NASDAQ will be hard pressed to hold the 50 day. NASDAQ impacts SP500, SP500 impacts DJ30, the knee bone is connected to the thigh bone, etc.
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