The stock market’s bullish rally has a number of pockets of weakness

All three stock market indexes are over bought as shown by the money-flow iindicator (i.e., it’s used in all of my charts). The Nasdaq Composite gapped higher on Friday, October 31 and has moved sideways since then. Down thrusts during this period suggest the Nasdaq is riding on top of support. Both the S&P and DOW rose all last week, but the rally seemed to run out of steam on Friday as the gain was minimal despite average volume. Safety is paramount here. There may be opportunities, but keep your protective stops tight.

My relative strength market sector table shows strength in parts of the market but terrible weakness in other parts. Six out of eleven sectors in the Cyclical Group lost strength since October 1. But the Real Estate, Builder, Retail and Transportation sectors were all strongly up. Strength in the Transportation Sector suggests improvement in manufacturing. Three of the sectors in the Technology Group were also losers including the Semiconductor, Internet and Telecom sectors. The overall graph of Cyclicals versus Consumer Staples shows an exceedingly modest gain since the mid October stock market lows. This shows a divergence between the cyclicals and the overall stock market. The stock market has been moving higher without the participation of half of the sectors that make up the Technology and Cyclical Groups.

Here’s the relative strength chart of the Transportation Sector:transportation

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