Something Different is Happening

When a market or stock starts behaving differently than its norm this cam frequent be a sign of a trend change.  Since 10/30/20 bottom, the Nasdaq Composite has outperformed the other two main US stock indices: the S&P 500 (SPX) and the Dow Jones  Industrial Average (DJI).

The IXIC  gained 30% from 10/30/20 to its all-time high on 02/16/21.  The DJI and SPX gained about 22% from 10/30/20 to their respective all-time highs.

The IXIC  from 10/30/20 was clearly the strongest index. Yet the drop from its all-time high was 8%.  The SPX from its all-time high fell about 3%, the DJI fell about 1% from its 02/22/21 top, then went up and made its so far all-time high on 02/24/21.

For several months IXIC  has been  the strongest index, now it’s the weakest of the three main US stock indices. IXIC may now be leading the way down.

The daily IXIC and DJI chart courtesy of Trading View illustrates the divergences.

The DJI  unconfirmed new all-time high is what I call a “rule of the majority signal”.  This happens when one of the three main US stock indices make a new high/low unconfirmed by the other two indices. When this happens, the truth is with the two unconfirming indexes.  In this case bearish.

A  break of  two of the main US stock indices below the 01/29/21 bottom could be a very bearish confirming signal.  If this occurs a blog will be issued to explain the situation and possible consequences.

Traders are holding 25% short non-leverage SPX funds as of the 01/07/21 open.  Continue to hold short.  

Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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