We may well have found the top today. Yesterday we saw a resistance level at 1356 on the year long chart, and that was today's high. We had a sudden and very sharp reversal right at noon, which supposedly was triggered by some news out of Greece, but I suspect (tin foil hat time) that this morning's rally was engineered to mask big money selling, and right at noon the big boys pulled the rug out. We now have a distribution day (I will have to check with IBD if yesterday was, but I think the drop was too small) and a cluster of blue bars on the Elder impulse chart. A trend change may well be imminent.
The Nasdaq may also be topping out here, although on a relative basis this is still out performing. The problem, however, is AAPL, which is such a large part of this index that it is giving us a distorted picture. Take it out and this is a whole lot weaker.
Oh boy, this does not look good. All of a sudden we have a declining price relative, a down trend in price, and a red bar giving us a sell signal. While sell signals in bull markets are usually false alarms, there will always be one time when they aren't. It might not be time to sell now, but it is time to stop buying.
| Ticker | Relative Strength Index (14) |
| XLK | 73.81 |
| XLY | 69.9 |
| XLP | 66.69 |
| XLE | 65.14 |
| XLV | 63.21 |
| XLF | 60.45 |
| XLI | 59.61 |
| XLB | 53.96 |
| XLU | 47.88 |
Here are the sectors ranked by RSI. Last week we had several sectors over 70 ("overbought"). I expected them to pull back, and all but XLK did. XLK, of course, contains the aforementioned AAPL.
Usually when you see a reversal candle like this one (I believe it's called a bearish engulfing candle), it is usually the first warning shot of a trrend change. Of course it tells us nothing about how long the trend change will last, but it is a clear warning.
XLU continues to grid out a bottom here, and if we are going into a correction, we should see the price relative rise. So far it is not, so a correction is not a "done deal".
It appears the rally which began just before Christmas and continued, inexplicably, into January and half way through February, is about over. Woth the lack of distribution, I don't expect a major correction here, but if distribution picks up in the next few days, that will change.
I will have the new highs update shortly.
