Wednesday, February 22, 2012


Is the S&P 500 Index or the New York Composite a better gauge of performance in the stock market? The S&P was carefully selected by a committee to represent the American Economy. On top of that, billions of dollars are invested by many money managers into mutual funds and pension funds that track the performance of the S&P.  However, the short and intermediate term does not suggest for much of a correlation if you ask me. In fact, I am more inclined to say the NYSE, and here's why.

Except for the NYSE, the skewed performance in all of the indices is due to a high level of volatility. For example, the Dow Industrials has now broken its previous high, the S&P 500 and the other averages have sustained a grossly extended multi month rally, and the internals are screaming overbought plus diverging.

It all goes back to the Head and Shoulders Topping Pattern. As you can see in the chart below, the New York Composite is now approaching the neckline of the Head and Shoulders Topping pattern. Once the neckline of the pattern is broken, prices will rally back up on declining volume for a backtest. This rally is textbook, and better known as a Bear Market Rally. Depending on the drawn trendline, it may or may not be complete.

Take a look because it could be this Index that will complete the long awaited top in stocks for the S&P 500, Dow Jones, Nasdaq, and the Wilshire 500. The Russell and Transports still remain a sell signal.

The New York Composite Index

Several other charts to show you...

The U.S. Dollar- Daily Chart

The Russell Index- Daily Chart

Gold and Apple

1 comment:

  1. Your blog post for the us dollar is very intresting.he dollar's value can be measured by exchange rates, Treasury notes and the amount of dollars held by foreign countries. These three measurements usually are in sync with each other. No matter how you measure it, the dollar is losing value over the long-term.