The Stock Market is likely to keep moving sideways as the S&P is still weak

The DOW is below the middle of the big July drop. This suggests further weakness. The S&P is much stronger. But they are both in mildly bearish trends. The Nasdaq Composite, however, is in a bullish trend that began in late January. The divergence between the Nasdaq Composite being mildly bullish and the S&P and DOW bearish will end at some point. Most of the time, the three indexes move together. The all have rebounded strongly from their mid July lows. So, there’s support at those lows for the Dow and S&P. But, can the Dow and S&P break through the resistance at the top and break the bearish trend lines? If not, then we are probably in for a continuation of the months-long sideways move.

My chart dividing the cyclicals by the consumer staples shows the cyclicals continuing their bearish trend that began in May. But there are roughly the same amount of sectors that have gained as have lost relative strength in the Technology and Cyclicals Groups. The biggest loss, by far, is in the Basic Materials sector. It has been bearish for a couple of years. It is mirroring the worldwide deflation that has started to destroy mining. But, there were signs of strength: the Leisure, Transportation, Aerospace, Apparel, Internet, Pharmaceutical and Computer Software sectors all gained since July 1.

Here’s the relative strength chart of the Basic Materials sectorbasic_materials

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