Bottom Line:
The current upside rate of change in the SPX, NDX and DOW is highly unlikely to continue, and some Balance/retracement is increasingly likely.
The RUT is in an increasingly mature Balance Area and the direction of the breakout should be monitored closely.
Internals are very weak and diverging dramatically against recent higher prices.
The hallmark of the rally off last October’s lows has been a continual structural divergence. Here is what that means: Strong, intermediate to long-term bull and bear markets will have a four indices making pivot highs and lows closely in the same timeframe. Minor divergences will be common, but generally everything is moving either up or down with the primary trend. It is typical for one index to take the price lead, but the primary pivots will be almost the same.
The current glaring divergence in the indices is once again the RUT against the other three. It’s recent breakout is a net positive for an intermediate-term bullish case, but it has once again begun to dramatically underperform and is currently trading in an increasingly mature Balance Area.
SPX
Weekly:
The SPX is up 27% from its October low. It is only 8.4% from an all-time high. However, the current rate of change as measured from the low four weeks ago is highly unlikely to continue. Please watch the VIDEO for a thorough discussion of the charts below.
Daily:
If Friday did not put in a short-term top, near 4500 becomes the next most likely upside target. The last minor Balance Area of 4300-4260 any retracement should hold IF the market is simply in a short-term correction phase (discussions about why, SEE VIDEO).
Upper KRA: 4498-4527
Lower KRA: 4300-4260
Potential paths of Development:
NDX
Weekly:
The NDX is in the midst of an extraordinary run. It is up almost 20% in the past eight weeks alone.
Daily:
The NDX is less than 10% from an all-time high. There is decreasing “resistance” above last week’s highs from an Auction Market perspective until that all-time high.
Upper KRA: 15115-15272
Lower KRA: 14371-14206
Potential paths of Development:
RUT
Weekly:
The weekly view shows the stark underperformance of the RUT vs the other indices.
Daily:
The RUT is in an increasingly mature Balance Area. IF the NDX and SPX are near at least a short-term top the break should be down. If the break is up the NDX and SPX may underperform but should generally continue higher.
Upper KRA: 1907
Lower KRA: 1862; 1820-1798
Potential paths of Development:
DOW
Weekly:
I don’t think most people realize the DOW is the index closest to its all-time high.
Daily:
The DOW has reached an important upper KRA.
Upper KRA: 34328-34730
Lower KRA: 32941-32589
Internals:
I keep hearing chatter from pundits that the “rally is broadening”. It isn’t by this perspective.
Note that NYSE closing breadth has not has more than two consecutive days of positive closes in six weeks. If the SPX is going appreciably higher this HAS to change.
SPX / Breadth 30m
This may be in the process of a flip from Bullish to Bearish.
Thoughts:
The most confident thing I think at the moment is that the NDX and SPX will at a minimum become more two-sided on a day to day basis. We could be close to a top of relative significance, but make sure and rely on making the market prove it by taking out downside levels.
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US 10-yr Notes
Currently between important levels.
US Dollar
Consider favoring shorts. It looks like the Dollar wants to test the low end of the range.
Gold
Currently between important levels. You probably want to be long above 2001; short below 1931.
Crude
Crude has been brutally choppy for over a month. I’ll let a level break before getting involved.
