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Buzz & Banter



Just want to point out the divergences I am seeing and the pattern of those in the major indices.

At intra-day top in the DJIA on 7/31, both the NDX and the SPX failed to register new highs (or even get close for that matter). Interestingly, the last several days have seen the Dow stronger than the SPX which has in turn been stronger than the NDX. Indeed: yesterday the NDX retraced 20% of the points lost on 8/5. The SPX retraced 58% of its points lost and the DJIA roughly 65% of its points lost for the same periods. And today, the action seems to be more of the same: today the DJIA registered a new intra-day high compared to yesterday. The SPX (so far) has not. And so far today the NDX hasn't even came close to getting near its yesterday's high.

I share this observation simply because of how important the divergences in these three indices turned out to be at the major top in 2000. It's way too early to infer something from just a few day's observations, but it is something that we should continue to watch. After all, the NDX represents investor psychology much more sensitively (see 2000 top) than do either the SPX or, most importantly, the DJIA.

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