A little food for thought…..steaks on the grill.

Draw a trend line on the S&P 500 from the low on March 6 and use July 13 as an anchor. There have been five attempts in the last 7 trading days to break through this trend line but none were successful. Several attempts did break through but it couldn’t hold and by the end of the day it was back below the trend line.

Now consider that both MACD and RSI are showing negative divergences.

Now consider the volume indications from the futures markets. Large specs decreased their long exposure in the S&P 500 last week; large specs increased their long exposure to the U.S. Dollar index (Dollar up-market down); large specs increased their short exposure on the Euro (Euro down-market down); and finally, the dumb money (a/k/a…small investors) increased their long exposure on the S&P 500.

Now a final thought. The DOW was up, albeit ever so slightly while the VIX rose. Based on a quick scan of the charts, every divergence like this (DOW up with the VIX up from a relatively low point) was followed by at least one if not several downs days. In fact, one such occurrence led to the largest decline (mid-June to early-mid July) since the bull stampede started.

- Vics

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