(Edit: 4:30pm, August 29th. If you’re wondering what’s going on with IWM, it’s probably the small banks, many of which are in KRE. KRE was up 1% today and so IWM was up nicely and has been outperforming lately. As long as KRE continues to rally, then you should expect IWM and the $RUT to march to the beat of this different drummer.)
Per the 5/10 Method, I now have ‘sell’ signals for $INDU, $TRAN, and $SOX, though $SOX isn’t as clean as the first two. Financials, small caps, and big tech are holding up well and thus holding up the markets.
It’s all about AAPL. As long as buyers see no problem with paying $5-$10 more for AAPL everyday, then this rally will just grind on, which impacts $COMPQ, $NDX, and $SPX. While $INDU is more than 200pts off its monthly high and only up .72% for the month, $SPX remains solidly positive for the month, up 29.98pts and 2.17%, all thanks to AAPL.
It sure does seem as though the market is trying to top out here as it struggles everyday to close at or near par and while the three key indexes mentioned above are under heavy pressure nothing is going to happen in $SPX or $COMPQ until someone has the nerve to take profits in AAPL. It is amazing that one stock has so much power, but there’s no question that it does. One day THEY will put AAPL in the Dow and then were off to 20,000 or 30,000.
Daily chart of the Q’s. Take a look at the ADX, which is currently at 28.8 and closing in on 30. Thing is that while the ADX is confirming the rally in the Q’s, it is not confirming the rallies in the other indexes. The idea is that the ADX should rise as the markets move higher to confirm the rally, which is happening in the Q’s, and, to a lesser degree, in the $COMPQ. Once the ADX rises to or above 30, then at some point after that the ADX should start to roll over, which would signal the end of the rally. The ADX is rising about 1pt per day so if it is going to rise above 30 then that should/could happen by Thursday’s close. Nothing says that if ADX rises above 30 it can’t go to 35 or 40, but once it does rise above 30 then it’s time to start watching for weakness to appear. If there was ADX confirmation of other sectors, then I would have to assume that the rally in the Q’s would go on and on but since this is not the case, then I am looking for the ADX on the Q’s to top out soon, or famous last words.
I don’t know if the ADX for the Q’s will push to 30 before rolling over as I continue to expect a real sign of a market top to appear at any time. By that I mean volume off the top, a down day similar to what we saw on the 23rd but with significantly higher volume. Volume on the 23rd was 2.1 billion shares for $SPX, which was just too light to be meaningful. Until we get a down day with volume, then I have to assume that the markets are just going to grind along.
The last few weeks have proved to be tough on Bulls and Bears alike. I don’t know how much longer $SPX can sit in this holding pattern without giving a signal as to which way it wants to go. Market breadth is weakening and $NYSI has now given the first part of a fresh ‘sell’ signal. Volume into declining issues has been greater than volume into advancing issues for six out of the last seven sessions. That is not the sign of a healthy market and hints covert distribution but this is all conjecture until covert turn to overt distribution.
Cash is king in times of uncertainty.