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Well it may appear that way. And as the US heads into a midterm vote and with the prospect of a hung decision – this is still seen as a positive for the markets and so they just keep pushing higher.
As you can see from the overlay below our market (blue) has been somewhat more tempered in its recent ascent and is lagging a little:
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And if you compare the two finance sectors you can see again our banks have not been swayed by the euphoria:
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And you might also note that both sectors are a little ‘motherless’ at the moment with OBV seriously lagging the price move – in contrast to the overall market move.
But turning back to the DOW, we can see OBV for the DOW is showing a positive divergence:
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Volume is following price – a positive for the DOW. This rally could have some legs. I am not saying it will last forever or even months – but it could continue for a while and also take our market higher. But currently there is support for this rally of sorts.
The Bollinger Band that JJ talks of in his article show that they have been tracking the upper band for some time and we know when this happens that the probability of a return to the middle at least and the lower band are quite high:
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But a return to the lower band can occur at this point without major fallout.
And the oscillator confirms this:
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We are not far from the oscillator arriving at zero. But the Elliott count throws up another issue:
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If we were to see a pullback as depicted above this could mean an oscillator going well below zero – and that would be a sign of a weak market ahead.
In summary the DOW has some current strength and does not look like falling out of the sky any time yet. But we could see some gently easing in the short term.
Enjoy the ride
Tom Scollon
Chief Analyst |