One of the characteristics for much of 2013 was the tendency of the general market indexes to be in lock step with each other. There was a high propensity for V-Shaped bounces to make a marginal new high that was followed by a dip or digestion. While there wasn’t perfect harmony, and outside of short windows where one would outperform, there was unison in that if one made new highs the others would follow shortly thereafter. Since the January pullback and bounce the COMPQ has been the first to make a new marginal high, the SPX is within a whisker, and the $NYA, $RUT, and $INDU are still trying with the later two struggling slightly. This may simply be a period of outperforming by two while the others play catch up, but if there isn’t unison in new highs, a change of market character should be noted.
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| COMPQ |
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| $NYA |
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| $RUT |
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| $SPX |
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| $INDU |
Based upon what has been the norm since 2013 I’ve jotted down a few things to pay attention to in the near future. 1) Will the lagging indexes catch up and make new highs or will the leading draw down? 2) The SPX is in a zone where it churned from December through January. It is a concern if this does not break and run through convincingly. 3) December and January are seasonally strong for small caps and they are now beginning to lag. 4) There are breadth divergences occurring. Will they matter this time?
The breadth divergences that I have jotted down are the following: The number of stocks in the NYSE above their 20 period moving average is in a zone where pullbacks or digestion zones occur.
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| $MMTW |
The T2108 has been showing divergence with fewer stocks participating with each bounce:
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| T2108 |
The number of 100 day highs on the SPX has been diverging as well showing a divergence as fewer stocks participate.
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| SP % 100 Day Highs |
This is also shown on the NYSE where the percentage of stocks at 52-Week highs has been steadily declining.
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| NYSE % at 52-WK Highs |
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