A Reality Check ... Part Two
Last week we posted a weekly DJI chart showing how the volume has dramatically shrunk. (The update of this chart is the second chart seen below.
However, this morning, we would like to show you a monthly chart of the NYA Index that goes back 14 years. I plotted an 11 month Relative Strength Indicator so that you could see the changes in strength as the NYA moved over time.
If you look at this chart, you will see that the NYA Index has recently made a higher/high while the RSI has made a lower/high. This is called a "negative divergence" in the stock market.
Typically, negative divergences do not kick in until Inflowing Liquidity levels drop and are not enough to keep pushing the market higher. (This is one of the reasons why we publish the Inflowing Liquidity levels every day.)
The updated DJI weekly chart with its low volume is below. The positive about this is that it is easier for the Fed to influence the market when the volumes are low. The negative is that it will be easier for panic to set in and/or for the Fed to be overwhelmed.