Monday, June 11, 2007

Divergences in the S&P

Last month I noted that intermediate tops are usually accompanied by momentum and money flow divergences on the weekly charts. You can see in the above chart that the S&P is just starting to show divergences. Of course this doesn't mean the fall is imminent. The last intermediate top these divergences lasted 16 weeks. The market is just starting to lay the groundwork for a coming decline. Now we need to see the market continue up as these divergences grow and the commercials start to short the market, eventually they will get to an extreme level.