It looks like we have a deal on the debt ceiling. That Can the others rally? Has that been the lid on them for the last several weeks? Those are the stocks that are down and out. Those are the stocks that are oversold, like the Dow Jones Industrial Average I noted last week.
Everyone will focus on the resistance overhead in the S&P 500 here at 4,200 and again last August's high at 4,300. Nasdaq has last August's high right here in the 13,000 area and the PHLX Semiconductor Sector has it not far above either. But I am focused on whether or not the stocks that don't move the indexes can rally. On whether or not the love can spread. Or will this divergence continue?
For example, can the McClellan Summation Index finally turn up? It won't take much to do it but each time it has been in this position it has failed to jump on the wagon and get going.
Nasdaq's Summation Index (using volume) has been inching upward quite slowly as noted a few weeks ago. I like to think this is good for small caps, but this week will be a real test to see if it lifts itself up off the mat enough that we need not squint anymore.
Can Nasdaq's cumulative volume get up and over that prior high. It too has been inching (maybe more like centimetering up). Can it get going?
Can the new highs expand? Nasdaq, for all the fireworks there continues to fall short of the 200+ new highs we had four months ago.
Can the Transports finally get themselves up and out of this sideways slog they have been in? I mean, someone has to be transporting and delivering all those semiconductor chips and all the things they go into, don't they?
Can the bonds rally? Sure we finally got a little rally on Friday, but considering the move in interest rates over the last month, we should get more than we got on Friday.
In other words, my theme for the last few weeks is the love needs to spread out. Now that it looks like there is a deal, can we see the love spread? Because if we can't, this divergence will continue and my complaints will simply get louder and more frequent, not to mention, even though divergences like this can go on for extended periods of time, they are not healthy for the market.
