As much as we would all like for a top or bottom to be quick it never really plays out like that. Major turning points in the markets take weeks or months to form, and they is normally some type of divergence involved. Back in Feb-Mar 08′ and again in late 08′, early 09′, you could see the % of stocks above the 50day moving average hitting a bottom and forming positive divergence, while the markets continued to trend lower. I drew a “line in the sand” connecting those lows and the failure of this trendline to be broken sets the stage for a rally.
We could be seeing the same thing happening here over a period of months, with a series of lower highs as the markets continue to make new highs. I’m still trading this market on the long side, however it’s important to be away of this chart and take notice if it’s rejected here or if it breaks out.
