There is a divergence between the Nasdaq versus the Dow and S&P 500

There is a divergence between the Nasdaq versus the S&P 500 and the DOW. The Nasdaq 100 dropped on Thursday and Friday while the S&P 500 and DOW rose. This put the Nasdaq 100 below its May 22 high but the S&P 500 and DOW above theirs. Divergences do not tend to last long; they are resolved in favor of one of the two branches. The Nasdaq has
stayed below its 2000 high since the 2000 to 2002 bearish trend. It was only February that the Nasdaq passed the mid point of this drop. The S&P 500 and DOW are well above their 2000 highs. This means that their is an overhang of selling pressure on the Nasdaq that is not present on the other two indexes.

Our stock sector relative strength table does not reflect the divergence cited above. Part of the reason for this is due to weighting. Our custom sectors equal weight the biggest stocks from each sector in order to provide a more accurate overall picture. In the Nasdaq’s drop on Friday, Apple (-2%), Google (-1.5%), Microsoft (-11%) and Intel (-1%) accounted for 18% of the Nasdaq. Our technology group is the strongest of the four groups at an average of 0.39% (0.01% for cyclicals, -0.03% for finance and -0.67% for consumer staples). The overall picture is bullish with no glaring weak signals. Notable for their strength in July were the Leisure sector up 3.2%, Media up 1.6%, and bio-technology up 3.5%.

Relative strength chart of the Leisure sector:leisure

Relative strength chart of the Bio-technology sector:pharma

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