The daily chart of NH-NL shows several troubling developments:
· While the S&P is some 70 points higher today than it was in October 2010, the NH-NL is almost 70% below its October peak.
· There is a severe bearish divergence of daily NH-NL, with three lower peaks
· Last week saw a suden expansion of New Lows. Up until now the New Lows remained rather flat, the action was in the New Highs, but now the New Lows are coming to life – a sign of downside leadership.
In summary, the US stock market appears poised at razor’s edge. While the trend is clearly up, both on weekly and daily charts, the NH-NL is flashing red warning signs. It reminds us that bull markets do not move in straight lines, and this uptrend is ready for a pause.