The stock market’s gain is very narrow; weakness abounds.

The Dow is the weakest index; it broke its bearish trend line on Thursday. The S&P also broke its bearish trend line on Friday and had its highest close since May. The Nasdaq Composite is the strongest and shot higher on Friday. But within technology (contained mostly in the Nasdaq) the gains are coming from just computer software, bio-technology and Google. Without Google’s large gain, the entire Technology Group would have had a loss instead of a gain. All of the other three groups, Finance, Cyclicals and Consumer Staples, lost strength.

 

There are very few stock  market sectors that are performing well. In the Technology Group, it’s Computer Software, Pharmaceutical and Bio-Technology and Internet. But, the Internet Sector’s huge 14.2% growth since July 1 is due entirely to Google’s dramatic rise.  In the Cyclicals Group, only the Leisure and Aerospace sectors had significant gains.

 

This is a time to be defensive. Keep your protective stops tight.

 

A few days ago, I wrote that big bars approaching resistance make it much likelier that this resistance will be broken than do small tentative steps. Below is the graph of the S&P 500. Notice the bearish trend broken on Friday and the highest close since May. But, also notice that during the session on Friday, the bar didn’t make any progress. This is weak.
sp500

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