Today’s rally in the Stock Indices was extremely weak. Market breadth is diverging from price and continues to decline. The Dow Transports are diverging from the Industrials. The Russell is also diverging from the other Indices. This has typically lead to a decline in price. Unless the internals strengthen, especially volume, and the inter-market divergences get rectified, use caution on long positions. If short-term support is broken, we could see a short to intermediate-term selloff.

Should the internals strengthen and the Intermarket divergences get rectified, we are likely looking at new highs. In summary, price development is moving higher, but the internal structure is weak and weakening.

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