SPX is still within the retrace zone. It has a blue bar tonight so it closed outside the upper Bollinger band and is extended in price. Breadth was just barely positive. So far the overhead resistance in this area has not come in to play. Now that price is clearly extended will that make a difference?
Here is the stocks versus their MAs chart.
The number of stocks above their 50 SMA (bottom panel) is lagging significantly on this rally. That number was already low back in Aug. at the high. It does not appear to be getting any better. I think this increases the odds this market will roll over instead of breaking out and racing higher. There were only 170 new highs today down from 205 yesterday. Those are not particularly strong numbers this close to the high. Another sign the market may not be quite as strong as it appears.
There are a lot of stocks being left behind. At the same time there are a few stocks making really big up moves. Check out BIDU and NFLX. There are many purely junk stocks also flying up. This happens at tops a lot. Because the number of stocks going up is thinning out more traders are being attracted to the few that are still rising. It is kind of ironic when you think about it. Those few big winning stocks tend to make many people very bullish even though it is a sign of an important top. It happened in 2000 and in 2007. Now it is happening again. Maybe it is different this time, but I doubt it.
Bob
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