In my morning mail yesterday I mentioned that a possible bearish shooting star candle could be forming, but a confirmation in form of another bearish candle was needed. This bearish candle was seen yesterday. This last rally to new highs was followed by a massive divergence by the RSI-indicator, which indicates that this rally was a weak rally. That said, we need confirmation that a possible top could be in place. The first indication of a top will be a break below support at 1,850.61, while a break below support at 1,814.36 is need to confirm the top and add considerable downside pressure.
Below I have showed the weaker indices, they are the Nasdaq 100 and the Russell 2000. The Nasdaq 100 also showed the same bearish shooting star as S&P 500, but non of these indices was even close to the top from early March. The fact, that is the small cap stocks that is leading the decline, make the rally in the S&P 500 and DJI weak rallies. Normally the small cap stocks are leading stock market rallies, which is not the case currently.
I still think the rally of the last 5 years in the stock market, should be treaded carefully, but let me be clear. We have not yet seen confirmation of a possible top in the S&P 500, the DJI, DJT and the DJU, while both the Nasdaq 100 and the Russell 2000 looks much weaker, but here too, still no confirmation.
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