our favorite charts to get a quick read on the overall health of the market is
a simple comparison of DJIA, S&P 500, NASDAQ and Russell 2000 performance
to cumulative advance/decline lines. From late October’s low through
mid-February all four indexes moved nicely higher essentially in unison.
Advance/decline lines were also all trending higher. It was in mid-February
that NASDAQ turned briskly lower. Its advance/decline line also turned lower.
NASDAQ turned and its advance/decline began trending lower, DJIA, S&P 500
and Russell 2000 essentially went nowhere and traded in a range. Bullishly, it
appears NASDAQ’s advance/decline line appears to have bottomed in mid-May and is
on the verge of eclipsing its peak from February. Broad participation across
all the major indexes is a bullish sign and is generally indicative of a
healthy move higher is underway. S&P 500 closed at a new all-time high
today. DJIA, NASDAQ and Russell 2000 are closing in on their respective
the near-term, new all-times are likely. However, June is the last month of
NASDAQ’s “Best Eight Months” and historically soon after the start of the
second half of the year, around mid-July, markets have stalled out and tended
to slip into a sideways to lower trend. Inflation trends and the Fed are two
possible catalysts that could clip the market’s wings this year. Inflation
could prove to be more than just transitory and at some point, perhaps sooner
than expected, the Fed will likely begin tapering asset purchases.