Dark Cap Disparity ~ The Risk Averse Alert

Thursday, August 29, 2013

Dark Cap Disparity

With no solid technical indication yet of a pending turn higher—indeed, there's a better technical case supporting further weakness ahead—the widening performance disparity between large caps and "dark caps" (the new name for NASDAQ) really is bugging me because the latter's resiliency rather suggests that, as long as the exchange can remain open during normal business hours, there's a possibility we could see a blow off a la 1999, early 2000.

True, on the top side NASDAQ's momentum is lagging relative to early 2012 (see PPO, top panel), yet on the bottom side there has been no sign of any momentum degradation at successive higher lows since October 2011 bottom. What's more, since June 2012 bottom NASDAQ's momentum has failed to reach a positive extreme putting dark caps at greater risk of coming under pressure (see late-2010, early-2011, as well as late-March 2012).

So, maybe I should take back last week's labeling a "sucker" those claiming underlying strength in the face of NASDAQ's darkness. Then again, let's see what further weakness develops over coming days, and then ascertain whether long-term resistance is likely to remain intact subsequent to seeing some indication a turn higher is at hand.

Word on the Street
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