Wednesday, September 14, 2011

Bears Seem Surprised

One nagging problem with the current rally is the fact that small cap stocks are lagging badly as shown by a the relative strength line against the Qs.  However, there is a positive divergence developing in the MACD of the RS line.

On the other hand the QQQ relative strength is making new highs.  In fact it is at multi-year highs.  This is a significant positive.

The pattern in the rally is not impulsive overall, so the view of an extended correction is still on target.  There will probably be some more downside testing at some point near term, but the intermediate term trend is looking up for the foreseeable future.

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