The S&P is 25 points away from its all time high at 1576, so it has yet to confirm the Dow record. However it put in a strong week and other than the ADX which is giving a cautionary signal, all seems well. The markets are up, not because the economy is so great but simply because the Fed keeps giving money the favored banks and they in turn inject it into the market since the rates are so low, bonds are not the place to be.
The Nasdaq definitely has not confirmed the dow record high but is way behind its 2000 record high. In fact it has yet to take out its Sept. 2012 high of 2878, which until it does, I consider that to be the head of the possible head and shoulders bearish formation. It is basically chopping around sideways with little momentum. Apple of course is a big drag on it, breaking below 400 this week for the first time in over a year.
The small caps measured by the Russell 2000 has confirmed the Dow and is making new highs. For a while I thought this was going to lead the pack down, however, it took off and has been leading on the upside. The only caveat here is the ADX roll over above the 50 mark. It has yet to cross over its moving average, but often this will precede a trend change by 1-3 weeks.
Even though the Dow has made new highs, and looks quite strong here at around 14,300, the S&P still has to exceed 1576 to take out its highs and its just at 1541. This lack of confirmation by the other indices is a bit of a warning not to be too exuberant and protective stops would be in order.
The Nasdaq 100 is nowhere near its highs of 4816 in March 2000 but more importantly its not even taken out its highs from last September 2878 and seems to have fallen back when it stuck its nose above 2800, closing today at 2792. The weekly chart still looks like a big Head and Shoulders pattern, quite bearish.
The Russell 2000 small caps has made new lifetime highs a couple weeks ago, but on this latest rally it has not been able to break above those and on a weekly chart it looks like its getting an ADX peak sell signal. This could come about in weeks or days but it will result in some sort of pull back.
Well two up days in a row seem to have voided the big drop on Monday (2/25) however this all seems to be a normal pull back to the 50/10 LRC lines and the volatility stops. On the Nasdaq 100 the 50/10 have crossed under bearish and the 25/5 is already below the 50/10. Unless the price gets over 2780 or the purple 50/10 LRC, this looks to be still headed south. With these wild whipsaws though, it could poke above then sell off. Who knows.
The small caps, the Russell 2000, have not yet had a complete 50/10 bearish cross but did stop their bounce at the 25 LRC and the volatility stop. A normal bounce unless it continues up and exceeds the previous high of 932, then all bets on the bear are off.
Last week I posted that the Russell 2000 was foretelling of an upcoming bear move. Generally small caps lead the way. After a bounce Friday to the 50/10 LRCs and giving the 25/5s time to cross below the 50/10s, the market is now resumed its down move. There was a bounce this morning but it was stopped at all the various resistance points. A great shorting opportunity.
Quite a reversal today with the Nasdaq 100 down 1.5% and the Russell 2000 (RUT – small caps) down almost 2%. Looking at the daily chart the RUT sliced through the 50/10 LRC and actually took out the volatility stop. The S&P, Dow, and Nasdaq stopped right above their Volatility stops but in my experience, the small caps lead the way and therefore the RUT may be telling us something. The Nasdaq needs to take out 2700 and the S&P needs to drop below 1495 before we really have something here. But back to the RUT, the last pullback was to 894.34 so that will be the first important benchmark to see broken. Many more after that including up trendlines 810ish, bolinger bands 890, and big support at 868.50. The Ergodic has crossed down and is giving a bearish divergence. The ADX turned, a magenta ball per Gail Mercer.
The weekly is also validating this possible warning sign. We have a upper bollinger band failure to penetrate, usually means exhaustion. We have a way overbought ADX at 65. And we have the ERgodic beginning to roll over. The week is not over and these are all just the beginnings so we need to see a lot more confirmation but I still think this is a warning of some significant down moves in the market ahead.