President Trump sent the indices lower this morning after several pessimistic tweets about the likelihood of a trade deal with China. It may just be part of the negotiating game but the market doesn't have much to focus on right now as it awaits earnings from Apple (AAPL) tonight and the Fed interest rate decision tomorrow.
Breadth is solidly negative with around 2330 gainers to 4475 losers but more significantly there are around 140 new 12-month highs and the same number of new 12-month lows. With the indices still so close to all-time highs that illustrates that there is quite a bit of underlying weakness.
The ratio of new highs to new lows is one of the key components of the ominous-sounding technical indicators called the Hindenburg Omen. The name causes many serious market players to scoff at it but one of the keys to its calculation is that there is a high number of both new annual lows and highs.
The thinking is that when the market is trending upward but has a high number of new lows as well as new highs that it indicates a high level of uncertainty and suggests that the willingness to sell is increasing. A cluster of 'Omens' is seen as an indication of a market top.
I'm not rushing to sell but it is important to keep on eye on the number of new highs and lows. Those readings tell us quite a bit about the level of momentum that exists. It should be a big surprise that the number of new highs is low given the dull market action but that needs to change if the indices are going to keep running higher.
I've been a net seller this morning but also reduced an index short as I position for the Fed tomorrow. I'm much more interested in trading the reaction to the Fed news than I am in trying to guess what the reaction might be. There is little choice but to be patient and wait.