Wednesday Market Momentum, Breadth, Volume
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The market continues to be strong but caution is called for because the market is somewhat overbought.
There is a divergence in the two major indexes as the NYSE is showing considerable underlying strength, but the NASDAQ is showing some weakness. The NYSE new highs/new lows are quite healthy and compare to the strong levels shown during this past winter. However, the NASDAQ is a bit weak with new lows consistently above the level of last winter and this is a little worrisome.
The NYSE bullish percent marches higher, nicely confirming the new price highs. The NASDAQ bullish percent lags the NYSE but is also generally moving higher in a supportive manner.
The chart below shows the very nice looking bottom and break out price pattern developed by the NYSE. Currently prices rest on the short-term uptrend and present one of the first tests to the trend line. A break here might indicate some short-term weakness, but this index is still a healthy level above the 50-day moving average.
Two views of the volume for the small caps are presented below using the OBV indicator. This indicator tends to lead prices and there is some small cap weakness developing as OBV is now pointing down and is right at its 50-day average. The longer term view is also present below to show a better perspective. There was a false signal last winter which shows the OBV needs to be considered along with other indicators.
The SOX broke out very nicely today shown below in the first chart which is the daily shorter-term view. Let's hope the strength in the SOX continues and can lead the NASDAQ higher. The longer-term view in the second chart shows the SOX trading within a range for a number of years, so the real test will be when prices approach the upper level of the range.
