Lonely Dow

The markets moved higher on lighter volume again today with the Dow making a new rally high all by itself. This fact alone should give traders pause. The chart above shows that the Qs are still below the primay trendline from the March low and in the process of developing a broadening top formation. Markets can breakout either way from such a formation but it is typical to see 3 touches of both the upper and lower trendlines.

I have relabeled the wave count with a new count that eliminates the ending diagonal triangle pattern. Thus, the likelihood that we will see a retest of the July low is significantly diminished, which fits with the fact that there is little time left to complete the 10 month cycle low. The number of new highs continues to fall relative to prior peaks - another sign that the rally is narrowing and another sharp downdraft is likely.