Looks like a week of consolidation in the markets. The Dow did hit an all time new high and the small cap and transportation indexes are going gangbusters. The DOW not only made a new all time high, but it now appears to be forming a bull flag. It could trade up from here to 19200 which would be the top of the long term up trending channel.
SPX is with in 4 points of the double top, all time high. So. not unusual for it to pull back on Friday. It is a bit of a divergence, though as the NDX and SPX are usually the leaders not the followers. Typically, the tops of markets are lead by poorer quality stocks ( Russel 2000). Many of the stocks making up the bigger indices are not looking good. I would think the SPX pulls back here to the moving averages at 2140 or so. If it does consolidate in here and then breaks through the double top, SPX next target is 2265. The NDX is forming a wedge pattern. It does look like it is finishing wave four of a 5 wave pattern and wave 5 could take the NDX to 5170. But there are some problems with the NDX. The stocks that make up the big percentage of the index are not looking good. AAPL was in a down trending channel but broke out above that channel It will run into heavy resistance here, though on any move to go back up. AMZN, GOOG, NFLX, FB, BIDU and INTC (to name a few) all have the same pattern as APPL.
One of the strongest charts of the majors is the Dow Transportation. I have been writing about this for the past month. Since then, it broke through resistance around 8140 and has gone vertical adding on 700 points. It appears that it is only in wave 3 of a 5 wave pattern. And it is only 5% below its all time highs. With the Tranny this strong and the DOW hitting new highs, I cannot see how we are near a top of this bull market.
IWM (the ETF for the Russel 200) has also gone vertical since the election adding on about 10%. It is trading at the top of its rising channel and definitely over extended. It would be healthy for it to consolidate in here and let the SPX and NDX catch up. That would be a far healthier indicator that the secular bull market is well in place.
The financial ETF FAS shows that one of the market sectors leading this rally is the financials. The ETF is trading right at its all time highs. It looks like it is in the 5th wave of a 5 wave pattern. But, at this time, it looks as if financials are over bought and need to consolidate.
The other three sectors that I think will lead the market are Biotechs, Infrastructure (especially software infrastructure (look at CARB for a perfect chart) and Semiconductors . The ETF SMH made a nominal new high this week (16 year high). And we saw a lot of good action in those stocks over the last few weeks like AAOI, AMAT, AMD, AMKR, AOSL, and MU. The bio techs rallied strongly just prior to the election gapping up last week and now looks to pull back. The ETFs LABU and BIB don't usually consolidate sideways. They will have an orderly pull back before taking off again. So short term biotechs are over bought. But any kind of melt up in the markets and they have a lot of room to move to the upside. But, also, this is typical market action coming off a bottom. You have have a very sharp rise and everything looks over bought (McClellan Oscillator) and stocks will trade sideways until the overbought condition resolves itself.
Oil looks to be consolidating in the mid $40 range and it looks like it want to go higher. I think energy stocks are a mixed bag right now and it needs to work through a lot of fundamentals before it becomes interesting, long or short.
Gold continues to trade down. So NUGT and JNUG are off sharply. It seems to be in the 5th wave of a 5 wave pattern. Gold is at support right now so we will see if it holds. Silver already seems to have broken support.