The latest leg higher in the bull market (off the 2016 lows) has been lead by the Technology sector and Nasdaq Composite.
FANG stocks (Facebook, Amazon, Netflix, Google) have given the Nasdaq an extra burst of momentum, helping to create a self-fulfilling ride higher… but that’s also given rise to the everyday investor idea that the ride will last forever.
Back in February, several stock market indices hit long-term resistance at the same time. This created a short-term market top and gave life to the February stock market correction.
After the correction, the major stock indices recovered. And the Nasdaq has made marginal new highs. So what’s the concern?
While the Nasdaq was making new highs (March 9), the Dow Industrials and S&P 500 were not. That divergence is worrisome by itself… but it’s not the only divergence. While the Nasdaq was making new price highs, its RSI momentum indicator was not.
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