Is The Rally Ending?

The good news here is that MACD histogram is still rising and the Elder impulse chart, while not on a green signal, has not been red for sevreal days, either. the bad news is that the market is a week off the low and still not flashing a buy signal, which means the market is very weak, and that this pattern definitely looks like a topping pattern, meaning we are very unlikely to go much higher from here.  I figured we had a pretty good chanc of bouncing up to 1250, but that is now looking a little optimistic, but the picture is still not quite clear. We will get a clearer picture tomorrow.

The price relative line is a critical indicator on the Nasdaq composite, as when it trends down it usually means the market is about to tank. It did a "reverse breakout" today, breaking down to below the previous low, which looks like a pretty important level.

I would have liked to see a stonger bounce out of the Russell 2000 as well, and we really didn't get it. Price relaitve did rise, but just barelyu, and is now threatening to move down again.

XLU is this week's strongest sector as measured by RSI, which in no way is a surprise. What is, at least a little bit, is the rising price relative. I would expect it to rise when the market is dropping, especially as fast as it did, but I would not expect in on the bounce. It appear to me that mutual funds are going onto this because they are expecting another leg down and positioning themselves for the least amount of damage.

XLI is the weakest sector, although XLF has dropped back down and is very close to last place, and the charts look quite similar. Price relative is going in the opposite direction here, and you can see just how weak the bounce has been. as the majority of buying here was probably shorts covering. As weak as it has been, MACD histogram has not yet reversed, but another bad day will reverse it.

This bounce, if it is over, was a lot weaker than I expected, and that could mean the next leg down is going to be nasty, but we won;t know for sure until it starts dropping. the big money appears to be going defensive, so down;t ount on a big rally anytime soon.

I will have the new highs update shortly.