The key to the market strength since the rally started in November has been the consistently strong closes. Prior to the past week, there have been no weak closes in 2017. We now have two weak finishes in the last four trading days. The indices closed poorly last Thursday and again today.
The losses so far have been minimal, but the weak closes combined with poor breadth and the collapse in stocks hitting new 12-month highs are noteworthy. There were only 120 stocks hitting new highs and slightly over 100 making new lows, which isn't the sort of ratio you'd expect with the indices still so close to all-time highs.
Although the indices are down, they are not reflecting the underlying weakness very well. Breadth has been poor four days in a row, and with so few new highs the ranks of leadership are very thin. There are a few things like Momo (MOMO) and Arista Networks (ANET) that are acting well, but there are very few themes at work right now. Biotechnology had been showing good relative strength but it fell sharply today on talk of new rules for drug pricing.
I'm not ready to proclaim a change in trend, but the uptrend is under pressure and there are some problems with the technical action. The weak close, poor breadth and limited number of new highs are hinting at a change in market character. It is still premature to be bearish, but caution is required.
Have a good evening. I'll see you tomorrow.