Rally fades, again

qqqq0519.pngThis part of the recent stock index rally has not been a smooth ride. Four days ago there was an upthrust and failure to hold recent highs. The following day (three days back) the big up day made it look like that failure was a failure as the market was able to overcome the very negative technical picture. Volume didn’t really pick up much. Today the indexes made another upthrust bar, with a down close on the Nasdaq and a slightly higher close on the S&P, but still leaving an upthrust tail. The uptrend in both markets is still intact, with the faster moving average (cyan line) still holding the declines. In the S&P the momentum indicator (not shown) is still pointing upward. However, in the Nasdaq there was a downturn today with a bearish divergence. The yellow dashed line on the QQQQ chart should be the obvious line of support is the uptrend is to continue. Stops will likely be tested, but if that test fails then the next likely target would be the pivot of seven bars back. These are the toughest trades, when the indicator signal a divergence against the trend. There can be many divergences and failed upthrust bars during an uptrend. Those that work out seem to jump off the charts when they work out, and when they don’t the eye tends to gloss over the failed signals. With the light volume and lack of ease of movement, I’ve been suspicious of this upmove.
ad0519.pngAnother problem, along with light volume, has been the advance decline ratio. You can see how the advancing issues divided by the declining issues has been relatively flat during this upmove. This chart is of the Nasdaq advance decline ratio. The S&P does look a bit better, as it has uptrend somewhat. There are few issue in the Nasdaq that are participating in this uptrend. I’m sure many analysts are watching this indicator and probably aren’t bothered by the lack of participation. Maybe what everyone sees is not of much help. Another index that is getting much attention and fueling the bull case is the advancing transportation average. That has been pushing higher with more momentum than the industrials, and that is despite the advancing oil prices. Even the Baltic Dry indexes, after plunging recently, is pushing back up to the highs. A point that has been bothering me is that the stocks rallying are mostly the same as the momentum and bubble stocks that have been leading the way for much of the last several impulse waves. It seems that if a new uptrend is to start there would be a rotation into a new group with new leadership. Maybe this is just a gut feel, but it seems that there is interest in keeping yesterday’s winners alive. Something new would seem to have more staying power. Maybe I’m just bored with those stories and would like to see something new besides a small group of tech stock, and the commodity plays that mostly depend on the continuation of the declining dollar and the bric countries surpassing the US.