Transcendental Market Fragments:
The Market:
The top that is building out in the market is classic in its bearish divergence, right in line with historic tops of the past. The blue chips of the Dow Industrials and S&P 500 are the last men standing as they inch somewhat higher on every rally cycle. At the same time, the indices representing the broad market (small-caps, mid-caps) and leading sectors (Semiconductors and Banks) are falling further behind - all remain below their closing highs of 2009 by more than a month now (all formed their closing highs between October 14th and 19th). This falling-away of the vast majority of stocks indicates that money is moving where it is treated best: in the largest blue chip stocks which have the financial muscle and cash reserves to ride out the storm and, perhaps even make money from their exports. For a historical comparison to a similar era, one need not look too far back in history: the months leading up to the Crash of 1987 was very similar in its divergences.
Dow Industrials:
The Dow Industrials have clearly been leading the advance. When the generals are advancing and the troops are lagging, it's not a good sign for continuation of the trend.
The rally yesterday stalled right at the price (10495.2) where the July-present leg up is equal to the March-June leg up. That means the Dow may be very close to a top (around December 1 ?).
There was nothing in Monday's rally that should have elicited confidence in this market. The Semiconductors rallied slightly, but entirely within Friday's range. And, the money flow line for the sector actually lost ground, indicating sellers were using the rally to unload shares. The Bank Sector Index also moved up, but stayed within the narrow trading range it has been working its way through for the past several weeks. Money flow there was slightly positive, but mostly tepid.
Dollar Index:
The main mover was, as usual, the Dollar Index, which retraced much of last week's gains. Although the Euro rallied, it remained well within its trading range.
Until there is a breakout from the range, there won't be a good trend in effect. |
