U.S. Stocks: A Top Could be Imminent

SP:SPX   S&P 500 Index
Market Breadth:

52-week new highs:
Stocks that are breaking to new yearly highs, which is another key breadth indicator followed by market technicians, when the number starts to diverge failing to make new highs, while the price index continues to grind higher, this usually indicates the lack of internal strength and concerning.

Stocks above long term average:
Swings from excessive bullish and bearish sentiment have been a good contrarian market indicator for the past years. Every time the indexes of stocks above or below 200-days Average reached an extreme of 90-100 percent a correction in SP500             was close.

Instances where the index started falling, diverging away from the SP500             index (indicating internal strength is weakening) were bearish signals, as at least a hefty correction followed. The chart below Illustrates these divergences, where periods of prolonged divergence followed by a more sever downside move, while minor divergences followed less severe corrections.

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It has been a while just like that divergence. I think it will continue to do so because of not so invisible artificial hand in the market. So, I won't jump in it. Unless there is a news saying stronger tapering. Other than this, I am Naysayer for this.
Gallon alex.a
Can't agree more. The divergence has been there since Jan 2013 but the market continually breaking into new highs alone with money print. It looks like a bubble but may hold for while until tapering is necessary.
+1 Reply
Yes, it looks like stocks have run out of steam and is ready for a sudden surprise drop down. Though, watch out for hidden divergence that may actually keep pumping it up. Otherwise, excellent chart!
+2 Reply
Barabaszek Technician
Perhaps it is time to think about changing trend.
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