Major Indices Supported By Fewer Stocks

The market action was flat again yesterday, with

2092. For the past five days’ holding action, the SPX has traded in a narrow

range between 1219.59 – 1205.47 (1.2%), while the same
(
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0.8% between 121.94 – 120.94 (see chart).

NYSE volume was 1.35 billion shares yesterday,

but the volume ratio was 59 and breadth +564, both better than the major index

price action. All of the primary sectors, except the CYC, -0.5%, finished

positive, outperforming the SPX +0.02% gain. There was an aberration in the XBD,

E-Trade’s
(
ET |
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Some negative divergences are very apparent, as

the major indices are being carried higher by fewer stocks. This is primarily

evidenced by breadth and the bullish percentage position of the SPX, NDX and

Nasdaq (which is the lowest). The $TRAN continues to have a negative price

divergence with the SPX and Dow. The SPY volume has declined significantly on

this current price advance as the 5 RSI is now at 81. Also, the QQQQ, which

closed at 37.81, has still failed to exceed its 06/01 38.68 high, while the SPX

and Dow have both exceeded their early June highs. In addition, the
(
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remains within its trading range, closing at 34.74 and remains a focus should

the Generals and hedge funds push the breakout into month-end. The
(
TLT |
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PowerRating) has

gained +1.9% the past two days, while at the same time, the Morgan Stanley REIT

index ($RMS) hits new highs and is +18.3% since the 03/23 699 low. I refer to

this and the $HGX (PHLX Housing Sector index) to follow this sector trend, and

it shows no signs of weakening yet, as per these two indices.

If the major indices remain flat today, make sure

you are scrolling for those “Above the Line” focus list stock setups.

Have a good trading day,

Kevin Haggerty

P.S. I will be
referring to some charts here:
www.thechartstore.com in the future.