While the NASDAQ 100 (NASDAQ:QQQ) and many of the Magnificent 7 stocks went on to make new highs, the S&P 500 Equal Weight ETF (NYSEARCA:RSP) shows a different picture.
The Daily chart of QQQs does not exactly suggest a turnaround Tuesday after making a new all-time high on Monday.
However, with today’s inside trading day within Monday’s range, we have to consider following the equal weighted S&P 500 (RSP).
One instrument or another will turn around soon. Here’s the chart of RSP:
Either the QQQs will fail Monday’s low and trend lower as we continue the week given the Fed decision is on tap,
Or
The RSP will catch a bid and at the very least, bring the conversation back to a healthier market that is broadening out.
Wednesday the Federal Reserve is expected to cut rates by 25 basis points.
Considering that the belly of the market indicates poor breadth despite the growth stocks (which have proved to be more of a flight to safety), the RSP chart tells us a lot.
Out of the last 11 trading days, RSP has declined on 9 of the days. And on the 2 days RSP did not decline, the rally was meager keeping the downtrend intact.
RSP is well under the 50-DMA and into a caution phase. The slope of the 50-DMA though is still positive which means, we could still see a move higher back over the 50-DMA ending this decline.
However, unless we see RSP close over the 50-DMA for 2 days in a row, consider the implications.
QQQs might give it up or at least correct.
The sectors of the market that were beginning to improve could deteriorate and Santa, whom everyone is expecting, could head south, but without a sleigh full of gifts.
Twitter: @marketminute
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
