Friday, April 18, 2014

U.S. Stock Market - No One Rings the Bell At the Top

In my February 14 post I was looking for a top in the Nasdaq 100 index. Let me remind you the updated chart:


History repeats but the pattern has changed. Since February 14 the index have gone up a little bit but then....gone down and today it stands about 3% lower than in February 14.

What next? Of course everything could happen but the chart below is a sort of a ringing bell:


The grey area behind the index is the chart of Chaikin Money Flow indicator. Without going into details, this indicator shows whether money goes into stocks or out of stocks. As the chart shows, ahead of any major correction the Money goes out of  stocks - the slope of the indicator is decreasing (green lines). Looking closely at the chart you can see that a major correction is probably on because, despite the top in stocks, the indicator is very close to zero! What is more - due to the extended divergence (which started in May 2013) this could even be the topping pattern of the whole bull run.
The bell is ringing something big.

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