A month or so ago we began warning of the rising risk our technical indicators (not shown) were indicating. We came off our October buy signal for our subscribers on February 13, when the Dow was at 12,874. The blue chips have held up, with the Dow closing yesterday at 12,962, 88 points or 0.7% higher than when we took our profits. But the rest of the market has not fared as well.
The negative divergences have continued. The DJ Transportation Avg., which often leads the rest of the market in both directions, and the small stock Russell 2000, both topped out on February 3rd.
The broad-based Value Line Index topped out on February 17.
There used to be an old saying when the Dow was holding up while the rest of the market indexes seemed to be following each other in retreat, that at some point the generals look over their shoulders and see the troops are in retreat and that they are leading the charge alone, at which point they turn tail and join the retreat.
That could be about to take place.
We expect our next job for subscribers will be to determine whether we will see just a brief pullback or something more serious, and when we will get our next buy signal.
When risk is high we tend to let our short-term indicators have more weighting so we will be positioned if a short-term move morphs into something more serious. It's always more difficult to sell when the market is already moving down.
So we shall see.
To read my weekend newspaper column ‘Is This As Good As it Gets For Now?' Click here.
Yesterday in the U.S. Market.
Once again the Dow was down and looking like further down but it didn't happen. After plunging almost 100 points in the first hour, the Dow began slowly coming back and closed down only 14 points, or 0.1%. But that masked what happened in the rest of the market.
The Dow closed down 14 points, or 0.1%.