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Lance Jepsen
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I have been trading in the markets since the 90's. I'm the owner of the stock trading blog and the StockTradingMaster channel on YouTube. I've transitioned, like most, from a longer term buy and hold strategy to a shorter term swing trading strategy. I like trading in... More
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  • Stock Market Divergence Continues Between The S&P 500 And Nasdaq 0 comments
    Feb 23, 2014 4:31 PM

    The big divergence between the S&P 500 and the Nasdaq has become too big to ignore as just another temporary divergence in my opinion.

    Check out a 2 hour chart of the S&P 500 and the Nasdaq over the last 5 trading days:

    Divergence between S&P 500 and Nasdaq

    You can see that the Nasdaq formed a higher high, while the S&P 500 formed a lower high. Keep in mind, I'm just using the last 5 trading days as an example of the divergence between the S&P 500 and the Nasdaq. This divergence has been going on since the beginning of 2014.

    Stock Market at Major 1850 Resistance

    The S&P 500 is currently testing 1850 resistance. This is a major psychological resistance area. The 1850 resistance level has been tested three times over the last three months. Each time, the S&P 500 failed to break through this level. A triple top is a major Bear pattern that could form if the S&P 500 fails to break through this level next week.

    S&P 50 at Major 1850 Resistance

    The divergence between the S&P 500 and the Nasdaq seems troubling with gold being in a strong uptrend:

    S&P 500 Versus Gold Chart

    Gold traditionally does well when the stock market does not. There are periods where gold and the stock market go up at the same time but as a general rule, gold being in a strong uptrend is a bearish signal for the stock market.

    Strong bull markets, like the kind we've been in for the last 5 years, usually have a convergence of the major indices and not a divergence. A divergence suggests a differing of opinion between institutional traders and money managers that account for about 70% of market action on a given day.

    In this week's stock market forecast video, I talk about the divergence between the S&P 500 and the Nasdaq and why I think gold is a good buy for the first time in years.

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