Small-cap divergence on SPX’s push to new highs worth watching Array ( [cookie] => cb2bf8-929d09-84d816-661154-b29ddb [current_usage] => 2 [max_usage] => 2 [current_usage_crypto] => 0 [max_usage_crypto] => 2 [lock] => 1 [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 67928 [reason] => [method] => ) 1 and can accesss
SPX and QQQ at new all-time high territory has not yet been followed by similar movement from Russell 3k, Value Line Average, and DJ Transportation Avg, and this divergence will be important to concentrate on in the weeks ahead. Technology remains an outperformer after its recent breakout while Financials are starting to play “Catch-up”. Meanwhile, defensive sectors like Utilities, Staples are all starting to show evidence of hitting support, and likely are close to turning higher. Breadth has been waning in recent weeks while US Dollar and Treasury yields have begun to press higher which likely could bring about an upcoming consolidation for US Equities. At present, trends are bullish and trend reversals require a close back under 1/12/24 peaks to have even short-term concern. (SPX-4802.40).
The US Equity rally appears to be getting a bit tired, if the lack of follow-through on Thursday’s economic data was any indication. NASDAQ finished negative in Thursday’s session while SPX logged just fractional gains. Defensive groups like Utilities and Staples fared much better than Technology and Financials, but breadth finished at more than 2/1 bullish and all 11 sectors were positive. Overall, stocks seem to be in a goldilocks period where Consumer spending remains robust while the strong disinflationary trend has continued.
US markets appear to be nearing a key timeframe for trend change. The timeframe starts on Friday 1/26, and could materialize any time from Friday to early next week. This aligns with a 3-month anniversary of the October 2023 lows along with a 6-month anniversary of last July’s (2023) peaks. I expect that US Equities should be closing in on a minor window for possible trend change. However, any consolidation likely proves minor in scope and should bottom out into mid-February before a push back higher.


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