S&P Rally Still Looks Extended, Should Decline Soon

I know I sound like a broken record, but the S&P rally looks tired and should be reversing soon. The structure and strength of the decline will help me determine the larger trend. There's nothing really new to add to the short term picture; I'm still looking for a top in the S&P any time now, and a decline to the 1120 area at a minimum.

Looking at the bigger picture the higher risk indices have been on an impressive rally the past few weeks. Below are daily charts of the Russell 2000 small caps, Nasdaq Composite, Nasdaq 100, S&P and Dow. I'm showing you these charts because it can turn out to be a great scenario for the long term bears if this holds. At major turns in markets often the higher risk indices will lag, or well exceed, the rallies of the more stable blue chip S&P and Dow. You can see that this is now occuring with only the Dow and S&P failing to make new highs on the year. Of course though, this means nothing unless a top and reversal occurs before the blue chips make new highs. And I do want to note that oftentimes in big bull runs, the higher risk indices do lead the blue chips higher. So we just have to wait and see if this S&P and Dow divergence holds. If a short term top and reversal occurs without the Dow and S&P making new yearly highs, it will be reason for the bulls to sweat bullets big time as this is a major non-confirmation of the overall market's rally, and the longer it's held in place, the bigger the possible decline may be. So watch this.

There's nothing new to add to currencies. All is the same from the last post.


Russell 2000





Nasdaq Composite





Nasdaq 100





S&P Cash Index





Dow Industrials





PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.