On The Edge Of the Cliff

Between the previous low and the previous high, we are in a very narrow range, and volume is at summer vacation levels, so one might believe we aren’t going to be going anywhere in the near future. It could be that we won’t, but it does look like we have built up a substantial amount of downward momentum. This is looking more and more like a top forming, but at what time frame, we don;t know. However, caution now seems to be in order, and unles we can break out of this range, i don’t think I will be doing any more buying.  

 The range on the Nasdaq 100 is bit bigger, and the downward momentum is not very strong here, but I believe the same rules will apply here.

The range on the Russell 2000 looks even narrower, and the last leg down was pretty severe. ThaT is not a terribly big  surprise, but the weak move up today is. It might be pretty tough for this to get out to a new high.

The numbers on the percentage of stocks on the NYSE above the 50dma may have been skewed by the interest rate debacle of May-June, but the basic behavior seems to be about the same. This appears to have peaked (normally I would expect it to peak in the low 80s, but these are not normal times), and it has been dropping for about a month, so we just might be on the verge of a corrective move in the market.

The same indicator on the Nasdaq, which was not nearly as distorted by the interest rate correction, looks, for all the world, like a market that has peaked out. Normally the market will rally weakly for about a month after the peak, and that is pretty much what it has don, before beginning a slide int a correction. This is not predicting that, but it is saying the probability is quite high.

It is possible we have seen the top. A decisive brekaout will change that position, but because of seasonal factors, I don;t think we will see a decisive breakout this month. We probably won’t see a decisive drop either, but we may start seeing the warning signs soon.

I will have the new highs update shortly.