Category: The Briefing

Is The Market Signaling Warnings?

Intermarket divergences are much more exacerbated. While the NASDAQ was up today, the S&P was flat, but the Russell, Industrials and Transports were all lower. Obviously, higher weighted stocks, especially in the NASDAQ are holding those Indices higher. Market internals in all of the Indices are deteriorating. Unless the internals change and begin to support price, eventually the majority of stocks will weigh on even the higher weighted ones. While these signals can change, it is best to pay attention to them. Short-term support levels, if broken, can signal the beginning of a larger move.

Index Divergences Still Exist

The CPI numbers came out slightly better than expected. This led to an opening market rally. However, as you will see in the Briefing, the Russell and Industrials both spent the rest of the day selling off. The Industrials actually closed lower for the day. Volume was slightly higher and breadth expanded nicely. What happens tomorrow will now be extremely important. Critical short-term support is today’s low. The intermarket divergences give me some concern.

Indices Higher. Internals Lower

The Indices rallied into the close today. However, the Russell was lower. Volume was lower. Breadth was lower. Finally, the percentage of stocks above their 60 day and 200 day moving averages were lower as well. This all suggests a Market that is falling apart internally. However, there is two news events tomorrow that can change the perception of value and the internals could strengthen to support current prices. Use caution. Tomorrow could be quite volatile.

Stock Indices Pause In Front Of Fed Announcement

The Indices continued in their rotational pattern today. As is typical, the internals continue to weaken not supporting price. This is likely a pause prior to the Fed announcement on Wednesday and the release of CPI numbers Wednesday morning. Use caution going into the Fed announcement. Unless or until 525 is broken in SPY and 450 in QQQ, the trend is up with a lot of rotation.

Employment Numbers Weaken Market Internals

While the Indices made a higher high today, the Market internals continue to weaken. The Employment Numbers out this morning did not do anything to strengthen the internals. If fact, they weakened even more. As discussed in the Briefing, there appears to be a “floor” in the Market. Therefore, even though there is a slow grind higher, unless the internals strengthen, the risk is to the downside. If 525 in the SPY and 450 in the QQQ is traded through the buying tail not defended from last Friday, it could open a rotation down to test lower support levels. The lack of internal strength in the current rally is concerning, but the trend is up for now.

Market Internals Weaken In Front Of Employment Numbers

While the floor in the Market is still intact (525 in SPY and 450 in QQQ), the internals of the Market continue to decline. As long as these support levels hold, we have to consider long positions with caution unless or until the internals of the market strengthen to support higher prices. Certainly, the Jobs report tomorrow can have an effect on the determination of value.

There Is a Floor In The Market

After studying the charts for the last few days, I have come to the conclusion there is a floor in the market. That floor is 535 in the SPY and 450 in the QQQ. Therefore, the trend is up, unless or until there is a close below those levels. The problem with the rally is the internals are weak and not what I would expect to see in a strong bull rally. Therefore, longs have to be approached with good trade management. Also, beware of a news event that can change the current perception of value.

Stock Indices Continue To Pause At Important KRA

While the IWM (Russell) is showing more weakness than the other two Indices, the Market internals are continuing to weaken as well. Friday’s huge buying volume has not produced any follow-through. This is a difficult Market to figure out the higher probability of one event occurring over another. One thing is certain, while there may not be enough internal strength to drive price higher in a breakout move, there is a large force that refuses to allow the Market below important support. It will be interesting to see how long that can last.