Donald: I am also baffled by this divergence and spent some time looking at long term charts of the several indices that I track. This is what I noted: The divergence is not from the DOW to the NAZ. I is more from the DOW to the small Caps. There is sort of a gradual morphing (if might call this) from the DOW to the SPX, OEX, NYA, NAZ and finally RUT. I am not sure of the fundamental reasons for this divergence, but it appears to me that people have been selling the big stocks and rolling the money over to the small caps, therefore creating this disparity. And the fact that this divergence changes gradually from the indices I mentioned earlier seem to confirm this theory.
In past market bottoms, the money went into the big caps in the early stages. Then gradually migrated to the small caps. This is in alignment to what is happening today as well.
Finally, I want to say that the short term pullback that were are into right now may be a more serious matter than what it appears. My reason for saying this is that the DOW, SPX and the NAZ touched or violated the 200 day SMA and pulled back below it this week. The OEX may do the same very soon. I don't have an NYA chart in my data base, but I believe that it has not reached this milestone yet, neither the SOX. If in the near term, each of these indices go below their respective 50 day SMA, I believe that we will then visit the 7400 lows again. Hopefully they will bounce off from the 50 day SMA. I am crossing my fingers.
Rgards,
Jaime |
