The US stock indices sold off on Wednesday with the Russell 2000 / TF leading the way. Breadth was the most negative since last November. Readings in Breadth around the extreme reached today are almost always near time and price lows, in a bull trend. The Russell is making the strongest case for a significant change in trend, but a change in trend is so far not being confirmed by the other indices. The Dow in particular held up extremely well. This is actually a signal of almost all stock market tops of a topping process underway. “Process” is the key point to be made. Even if today is the beginning of a topping process of significant degree it is extremely likely that the process will take weeks or even months to complete.
Highlighted on the charts below are levels I don’t think will break prior to another low and an attempt to rally back to or above the recent highs by the Dow or S&P, and possibly the Nasdaq. If a top of significance is in place it is unlikely the Russell will be able to exceed its March high, regardless of how far the rallies of the other three indices may carry. If the downside levels highlighted on the charts below do break in the next day or two then it is likely we will see some rather dramatic short-term, wash-out type selling.
Tomorrow (Thursday, April 4) I am presenting a free webinar on the stock indices and I will be discussing the possibility of a potentially significant top in the progress of forming. We will be reviewing the most significant tops of the past four years as well as some other notable stock market tops, and we will see if there are some similarities beginning to show up between past tops and the present situation in the stock indices.
Russell 2000 (cash)