A Dangerous Divergence

The two charts below tell a rather bothersome story. We have a huge difference between the S&P 500, which is trying hard to get to new high ground, and the Nasdaq, which has so obviously broken support and is far below the highs. It is apparent that the more speculative stocks that had been leading higher are now leading lower. Combine this with a much too complacent volatility index (VIX) and an overbought 10-day moving average of the Arms Index, and you have an alert that things may not be as they seem.

Monday's continuation of the Janet Yellen rally brought in a quick gain but one that again quit as it neared the old highs. So the current action, in term of the S&P 500 and the Dow, is still the same checkerboard on the Arms Candlevolume chart. Usually a checkerboard says that we are in a standoff that could lead to a breakout in either direction, but the very different Nasdaq action hints that it will be resolved to the downside. Caution!...262 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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