The two-day rally of US stocks looks impressive in terms of the S&P 500 (SPX) which has risen 69% from its late 05/12/21 bottom. However, the Dow Jones Industrial Average (DJI) has climbed 58%, and most significantly the Nasdaq Composite is up only 37%.
The 30 – minute chart courtesy of Trading View illustrates the action among the indices.
The IXIC had been leading the bull market from March 2020 to February 2021. Since then, IXIC has been the lagging index and its performance during the last two trading days underscores its weakness. This role reversal is similar to what happened in 1999 to 2000. During the later part of the secular bull market of the 1990’s IXIC had the strongest upside performance. Then in early 2000 IXIC became the weakest upside index, and the leader of the new bear market -which lasted nearly three-years.
Perhaps IXIC is again leading the way of a new bear market.
Another factor hints of more downside action for US stocks and will be examined in the next blog.