Morning Report Tuesday 16 September 2014
US Indices diverge, but the NASDAQ fell hard last night - a sign?
Last night, the Dow rallied 44 points (0.26%), while the NASDAQ fell 39 points (0.97%), no doubt this is classic divergence. A lot of people will use divergence as a catalyst to identify a change in trend, but one of my favourite signals is that the NASDAQ and ASX200 often lead changes in trend. The local market has definitely been weak recently, down 3.6% over a few weeks. I remain short term bearish the ASX200; targeting sub 5,400, but if the US indices are now about to correct, we may fall to much lower levels of support. The local market over the last 3 years has seen almost all the heavy lifting by the “yield play” however, as we have witnessed over the last few weeks, when people get concerned over interest rates going forward, this can unwind very quickly.This morning I saw some statistics on Bloomberg that made me more comfortable with my short term bearish opinion on the US indices as it clearly illustrates the weak internals of the US indices:
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