an tSionna 5.09.09 Nasdaq Divergence.

Another busy chart! What I want to show is a divergence that seems to be setting up in the Nasdaq and by inference into technology stocks which make up a big chunk of this index. Even though the market has trended up so far for much of May, the Nasdaq has been struggling. Notice in the chart above that most of its early day strength has brought out sellers. This trend has been established in 5 of the last 7 trading days. {You can double click on the chart to make it bigger. Also I've added purple lines to show the different trading days.}

The Nasdaq is up about 35% from its lows in March so some selling is understandable as traders lock in profits or pare losses. Still this divergence is a bit worrisome and is indicative that the market could be in for a pause here or a partial retracement of some of its recent gains. As we've said before a pause or a retracement here would be welcome as it would allow the market to consolidate its gains. We'll watch this and see if it spreads to other areas of the markets.

If this is a rotation then the money looks like its flowing into commodities, commodity related equities and the banks. Note that for the appropriate accounts we did trim a bit of our Nasdaq related ETFs last week. Not a lot but enough to bring our exposure down a bit in line with more of a market rating. We are also still very long these ETFs for clients. Simply pared the positions back somewhat.

*Long ETFs related to the Nasdaq composite and technology related ETFs. Long certain energy related ETFs in appropriate accounts and long financial ETFs.