Internals

Tonight we have a Dominant Price/Volume Relationship in 4/5 indices including the NYSE Composite, the Dow-30, The Russell 2000 and the S&P-500. Only the NASDAQ 100 was missing a DOMINANT P/V relationship.

The dominant relationship was Close Down and Volume Up. This relationship is difficult to define in the current trend, it would normally be associated with downside capitulation after an extended move down and would indicate a reversal to the upside. We only have 2 days down so I'm not sure it's an important indication, however, considering that we are looking for upside in the DIA and SPY and considering the earlier posts today which indicated the NASDAQ may be coming out of  leadership status (and the NASDAQ 100 was the only average that lacked the relationship), this may indeed be a short term signal indicting an upside reversal.

Supporting evidence may be found in today's top performing sub-industry groups, the top performer was Farm and Construction Machinery, which would include an important Dow-30 component, CAT. Personal Computers were also in the top 5 performing groups, which would include Dow Component Hewlett Packard and by extension, IBM, Microsoft, Intel. Home Improvement stores were also in the top 20 (of 239 ) which would include Dow component, Home Depot.

Looking at today's worst performing groups, NASDAQ related groups were among the top 10, including: Printed Circuit Boards, Semi Conductors, Networking and Communication Devices, Data Storage Devices and Specialized Semi-Conductors.

Other hints included the closing 1 min divergences among the major averages. Note how much stronger the closng 1 min positive divergences were among the SPY and DIA as compared to the QQQ.

 DIA 2 hour divergence/leading positive divergence

 QQQ 1 hour divergence

2 hour divergence/leading positive divergence.

None of these bits of information say much by themselves, but when you consider this was the thematic finding of the updates today and you put this all together, it seems that my theory that the DIA and SPY will play catch-up while the NASDAQ steps back from leadership, should be taken more seriously.

Once again we have a counterintuitive situation in which we are looking for strength in the SPY/DIA to lead us toward a downside reversal.

That's the nature of the market and following the underlying market action rather then what appears on the charts.