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Secrets to a Better Relationship


There was no love lost in last week's market decline.


There was no love lost in last week's market decline. But buyers have been trying to patch things up with this week's rally. The relationships among major indexes is inverse from two weeks ago, when markets were topping.

Rather than the Dow outperforming, Nasdaq (NDX) led the way this morning by surging to a new high. Its current challenge is in trying to remain above yesterday's high. The Dow is at the opposite end of the spectrum, not only failing to print new highs this morning, but also standing alone yesterday in having failed to print higher highs then. Buyers have been diverting more energy into the NDX's higher P/Es, instead of being cautiously optimistic with the bluer-chipped Dow.

S&Ps performance meanwhile has been between the two, printing higher highs, following the NDX's lead. The only criticism - and it's not a small point - is that S&Ps aren't converting probes of new highs into actual breakouts. It's not so much a degree of underperformance, and more of an absolute: Unless S&Ps are also at new highs while chasing NDX, the underperformance is a non-confirmation of NDX buying.

New highs this afternoon in S&Ps would go a long way to buying the rally more time. A Dow recovery simultaneously would be icing on the cake, gravy on the steak, butter on the lobster (mmm, butter on the lobster). But today's probes of new highs set the requirement for at least S&Ps and NDX to close above prior sessions' intraday highs. Failing to do so would make the next probe of new highs much more likely to reverse down sharply intraday.
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