NFTRH Update, US Stock Market Setup

The ‘bounce’ has been more powerful than I thought it might, bringing the prospect of the next up phase – indeed a potential melt up phase – into the picture.  But one leader has been negatively diverging the rally of the last week…

The BKX-SPX ratio has led the bull market since 2011 but is surely not very enthusiastic at the moment.  This is despite a rise in long-term Treasury yields over the last couple of weeks.  Rising yields, like the rising BKX-SPX ratio, have attended the stock rally as yields bottomed in 2012 and turned up in earnest in May of 2013.

bkx.spx

Here is the 10 year yield.  BKX-SPX is stuck in the mud while TNX rises over the last 7 trading days.  These two have been inseparable throughout the most intense phase of the stock bull market.  The fact that BKX-SPX is vulnerable while stocks and long term yields are rising is notable.

tnx

The Dow is just below the 50 day moving averages and resistance.

indu

The S&P 500 got through the MA 50’s but is at lateral resistance.

spx

NDX blew out the shorts and left dumb money that puked out at the lows with their heads spinning.  NDX is a good view to the ‘shorting opportunity’ vs. ‘market melt up’ scenarios.

ndx

Tranny is at resistance and the 50 day averages.

tran

The Small Caps just look like a bearish setup, plain and simple.

rut

Bottom Line

The bear case for the short term is still alive.  If the BKX-SPX ratio breaks down, the market will have lost a leader.  It has already lost a speculative leader in the RUT, which is no longer out performing.

The lines are clear however.  Bears need to make a stand in the next few trading days or else a bull acceleration phase (potentially the bull’s final phase) could engage if resistance is broken, and as people who sold the January correction panic to buy stocks back again.