Wednesday, February 20, 2013

Stock Market Update




Above we have a weekly chart of the NASDAQ and in the lower panel the S&P500. You'll notice over the past couple of years that both markets have been moving together making highs and lows at the same time until now. Notice at point D how the S&P has made a new swing high but the NASDAQ has not. This is a bearish divergence and the fact that it is taking place on a weekly chart is of great significance.

The last really in the NASDAQ (points A to B) lasted for 15 weeks. This current rally (points C-D) is 14 weeks which is very similar in time to the previous rally. When you combine this timing factor with what price is telling us it makes me very cautious on stocks. In fact, I'm looking to short the NASDAQ if I see continued weakness as I feel the Q's can trade down to point C if this market does indeed rollover.

1 comment:

Anonymous said...

Isn't a great deal of this divergence attributed to the fall of AAPL?

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