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Lighting the Fuse


I was expecting more of a grand Grand Finale


Note to self: After igniting fireworks, remove hand from explosive device. Also, no open containers of flammable liquids near things that shower sparks. Sorry, just taking care of a little inner-housekeeping as I one-hand the keyboard here and make my way through "the morning after."

Expectations are that the shortened Fourth of July holiday week will likely start out quiet and slowly meander toward Friday before tapering off to a toothpick-to-eyelids event. But beware of market expectations. They have a way of catching us off-guard.

As it is, we start the week with the longer-term context still positive, the short-term continuing to work off the lingering remnants of overbought conditions, and the underlying theme, one of positive individual stock situations over broad index movement.

Taking a quick scan across the major indices, we can see on a point & figure basis where the battle lines are drawn for the week ahead.

Dow Jones (DJIA)
Chart courtesy Dorsey, Wright & Associates

S & P 500 Index (SPX)
Chart courtesy Dorsey, Wright & Associates

NASDAQ Non Financial Index (NDX)
Chart courtesy Dorsey, Wright & Associates

S&P Equal Dollar Weighted Index (SPXEWI)
Chart courtesy Dorsey, Wright & Associates

Is the divergence between the SPX Equal-Weight Index and the other major indices a bearish divergence, or a bullish divergence, or completely meaningless? Time will tell, of course, and the answer will appear quite obvious in hindsight, but as long as the contextual indicators are positive, the path of least resistance is for the average stock to drift higher as the capitalization-weighted indices lag. Hope this finds you well-rested and sharp this morning. Trade well.

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No positions in stocks mentioned.

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