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Contemplating our bearish outlook, this week’s rally has been laborious to observe; nonetheless, the configuration of the Silver Cross Index* (SCI) continues to point out how this rally could in the end fail. On the chart under, we are able to see in 2022 the market fell off the all-time value excessive, initiating a bear market. Notice the SCI double high damaging divergence. In March 2022, the market rallied strongly, however the SCI confirmed inadequate participation and the rally failed.
This week, now we have SPY making new rally highs, whereas participation has been dropping off the latest SCI decrease high. Through the years, I’ve discovered that the market will do just about what it rattling effectively pleases, however this setup, just about similar to 2021/22, is simply unattainable for us to disregard. We’ve got the SCI double high, adopted by a decrease SCI high, which is a powerful damaging divergence to the value advance.
Conclusion: The market is being carried greater by the mega-cap tech shares. We do not consider this example might be sustained, and that the rally will fail.
(*) The Silver Cross Index (SCI) reveals the proportion of shares within the index with the 20-day EMA above the 50-day EMA, an intermediate-term BUY Sign.
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Carl Swenlin is a veteran technical analyst who has been actively engaged in market evaluation since 1981. A pioneer within the creation of on-line technical assets, he was president and founding father of DecisionPoint.com, one of many premier market timing and technical evaluation web sites on the internet. DecisionPoint makes a speciality of inventory market indicators and charting. Since DecisionPoint merged with StockCharts.com in 2013, Carl has served a consulting technical analyst and weblog contributor.
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