The mighty S&P

Have we started down yet? Possibly what we are seeing now is the beginning of the downmove so many yours truly included, have been looking for.

Plotted at the bottom is a ratio of the S&P to the Nasdaq Composite. There are pundits out there that will tell you the Naz leads. I think I might argue the opposite, but have not really found a relationship of any consequence either way. I am continuing to study this so maybe I will find something. What this shows at the moment is that the Naz is leading. Yet the Naz is only about half of it's all time reading where the S&P is very close to it's all time high. So, it is hard for me to see how that shows that the NAZ leads.

The red trend line is the key here. We have a very strong bond market which is supportive of stock prices, but these two markets have been known to diverge for periods of time. I was short yesterday and caught a nice short term downmove. However, until we break the red trend line this has to be viewed as just a pullback in an uptrend. My gut tells me otherwise, but the trend is up so that has to be the guide for now. If we get a break of this trendline on a closing basis then more downside should be expected.