Tuesday, May 28, 2013

Technical divergences emerging

The Dow made another new all time high today but the other major averages did not follow.  The market also sold off into the trading session only to pick up some steam in the last hour.  This, in itself, is not necessarily a concern.  Here's the Dow as of the close today:

(click on chart for larger image)
 
I circled the last four days price action and have pointed to the long tails on each of the candlesticks.  If you bring all four days together as one big candlestick you get a giant "doji" which signals indecision.

But you can't say that the market is ready to roll over just because of this one possible candlestick signal.

But considering that the percentage of stocks above their 50 day and 200 day moving averages were lower today than Friday (Friday being a mixed day) and considering that the VIX rallied today and has been the highest it's been since May 1st and considering the number of stocks hitting new highs on the NYSE as a percentage of all stocks trading on the index is flattening, I think we're starting to see some cracks ...