We focus on the S&P 500 because of its broader market participation and on Tech, Semi and Small Caps for their leadership indications. But the Dow, which many lay people in the public think of as “the stock market”, is in a relatively poor technical situation.
While RUT has broken to blue sky from an Ascending Triangle, NDX has tested its top and made a new one, Semi has tested its top and thus far held below it and SPX is still technically on its daily uptrend with the potential of a top-test, the Dow is in what looks at this point like a bear flag as it grinds higher with declining volume. Notably, the down weeks (the chart below is a weekly) are happening on higher volume than the up weeks. MACD has failed to trigger up and RSI has gone below 50 (unlike SPX in each case).
Let’s put it this way; if the market is going to take another leg higher in the short-term rally it needs to do it quickly or it will have to try to do it with the Dow sticking out like a sore thumb, because everybody is going to see the breakdown, not just you and me. It is conceivable that Dow could rally to the top of the flag while other markets finish their top-testing.
With the market’s risk profile rising we should be on watch for any components falling off the rally scenario, let alone a major one that the public calls “the stock market”.
