Background: All sustainable and hold-able rallies have one thing in common. The Ratio of Leadership Stocks to the Broad Market is always positive and trending up to a high level. Simply look at the red bar graph below ... see when it was positive, and then look down at the NYA Index and you will see that these times all represented great upside rallies.
A high Leadership Stock Ratio infers that Leadership Stocks are growing in numbers and trending higher. When the ratio number outweighs the number of down trending stocks, then the Leadership stocks are "pulling the market up".
February 28th. Reading: Note the movement and momentum of the red Leadership Ratio bars on the chart below. Strong up trends and high reading always gives you a strong upside rally. Strong down trends always gives you a pull back or correction.
So what do we have now? Neither. Note that the Leadership Ratio has not been trending in any direction during the past few weeks. Instead, we have been seeing oscillating Ratio readings that are slightly positive or slightly negative ... ratio readings have been essentially hugging the neutral zero line.
Today's Comment: In the past few days, the market has been going up while the Leadership stock ratios have been flat and close to neutral. This is a negative divergence coming from Leadership stocks. It means that the sustainability of this up move is in question unless we start to see the Leadership Stock Ratio move much higher ... real soon.
(The Leadership Stock Ratios are posted every day on our paid subscriber sites. This chart will NOT be posted again on this free site during the next two weeks.)
My Best, Personal "non-stock" Tip for 2008 ... it will save you from wasting a lot of time, it will eliminate a huge source of frustration, and protect you at the same time.
What is it? See this link for my answer: My 2008 Best Personal Tip.