Danger Signs? Are You Serious?

The big news his morning was that Larry Summers has removed himself from consideration as the new Fed Chair. While I think Summers is basically an incompetent, evil A-hole, it does leave Janet Yellen as the new Chair, someone who will put Bernanke’s money printing to shame. The market seems to like that idea, and took off this morning, with a big gap up and a bigger rally, selling off a bit going into the close. That decisively broke R1, giving us R2 as the next target for this month. R2 is a long way off, and time is running short, but even if we don’t get there, I’m sure we will see a pretty good run at it.

Hey, not so fast, bull boy. The Nasdaq has now officially reversed trend in price relative, has decisively failed at R2, and is now badly lagging the SPX. This alone is not enough to kill the rally, but it will certainly put a damper on it.

The Dow industrials also have reversed trend in price relative, and that is normally not bullish. The Dow has made a very strong run after getting creamed in the last correction, which may be part of the reason for it’s current strength, but in the long run, a leading Dow means the market is going defensive. It might be different this time, but I would not bet on it.

The Russell 2000 is starting to look more like the Nasdaq. It failed at resistance halfway between pivot points, and while price relative has not officially changed trends, it is about to. If it does, the combination of Russell and Nasdaq laggards are going to make it extremely difficult, if not out right impossible.

The market is rallying on the “good” news of more of the same crap we have been getting from the Fed, but the Nasdaq, Dow, and Russell 2000 are all starting to flash some danger signals.

I will have the new highs update shortly.