The Dow made a good move to a new high, without the full participation of the rest of the market. This type of move could very well be confirmed by the broader market over the course of the next few days but it does put a shadow on the Dow’s breakout. As we mentioned previously, even the Russell 2000, the strong index, did not confirm today. Yes, it was very close and may follow through on Friday but it Lags the Dow tonight. These are the little cracks that show up near the top of a move.
As we look at the other indexes, the SP 500 is close to breaking a new high but the NASDAQ Comp is about 1.5% away. These numbers don’t sound like much but they are important due to the Dow’s leadership here. The NASDAQ 100 is about 4% from its recent high.
To add more technical information this evening, our momentum indicators are weak not to mention that two key indicators are not in strong confirmation positions, one being my favorite tea leaf, the 5 day upside volume and the other being the 5 day average new highs in the NYSE.
The basic idea here is that the momentum high had probably been put in place, that being back on January 11th. The two indicators are weaker in comparison to that date. Looking at the 5 day upside volume, January 11th had 1,047 million shares and today had 975 million. The January 11th total for 5 day average new highs was 302 while today it was only 135. This last indicator shows you that there are fewer new highs, meaning fewer Leaders, in this latest advance. So, while prices have moved a bit higher, the broader market is struggling.
Thursday’s news on housing starts was almost stunning, up 14.5%. The media tempered the news, saying it was due to the warmest January on record for the country. In other words, don’t worry, the Fed won’t have to raise rates. Ok, maybe that tired old line is not playing in the market these days. Today the bulls won. We bears will have our day.
Be careful out there…
Dow Industrials: 11,120.68 +61.71