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Breakout or fakeout? The Dow hit an all-time high yesterday, but I found the breakout technically unconvincing as it was unaccompanied by negative divergences. First of all, the upside breakout was achieved on low volume and volume had generally been declining since this advance began on February 26.

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In addition, the chart below of NYSE new highs - new lows is not confirming the advance either. The NH-NL differential achieved a recent high on January 24, but the current upside breakout saw a lower NH-NL differential, which is another negative divergence and a sign of bad breadth.

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All in all, an unconvincing breakout. With AAII sentiment at two year highs (via Pragmatic Capitalism):

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...indicating that sentiment at bullish extremes, these readings brings up the question of how much longevity the current advance is likely to have.

Disclaimer: Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. ("Qwest"). This article is prepared by Mr. Hui as an outside business activity. As such, Qwest does not review or approve materials presented herein. The opinions and any recommendations expressed in this blog are those of the author and do not reflect the opinions or recommendations of Qwest.

None of the information or opinions expressed in this blog constitutes a solicitation for the purchase or sale of any security or other instrument. Nothing in this article constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient. Any purchase or sale activity in any securities or other instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Either Qwest or Mr. Hui may hold or control long or short positions in the securities or instruments mentioned.

Source: An Unconvincing Breakout