Little Change For Indices From Last Week

Markets are posting small gains which in themselves offer little, but over the course of days add up to a stealth rally. Indices remain above key moving averages, which runs in support of the market trend. Tags of 20-day and 50-day MAs have provided buyers an opportunity to buy the dips but for how long?

The Nasdaq fell outside of its rising trendline in a slowing of this trend. The 20-day MA is still playing as support but it will take a test of the 50-day MA to assess how much real demand there is. One thing this stealth rally had me overlook was the overbought tracker - the index is in the 10% zone, which means the index has extended beyond 90% of prior price action relative to its 200-day MA dating back to 1971. So a top is closer than some might think. 

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The S&P is not as extended as the Nasdaq and therefore not as overbought. If the Nasdaq breaks then there may be some rotation to Large Caps before it too heads lower. 

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Small Caps are a long way from overbought but are at least leading relative to the Nasdaq and S&P and as long as this scenario is maintained then bulls will have something to work with. The breakout remains intact although trading volume is insipid. 

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While markets continue to move higher the opportunities for buyers to get in would appear limited given the overbought status of the Nasdaq and (near overbought) for the S&P. The Russell 2000 offers the best opportunity given the breakout, but there is a need to watch for the 'bull trap' should the breakout reverse. Other than that, markets are perhaps ranked as a "hold" with maybe some profit-taking recommended for the Nasdaq. 

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