In spite of the massive celebration of Nvidia's earnings report, we are seeing troublesome signs that the market is in the process of putting in a top. There are double top formations on six of the nine major indexes we follow, but the three indexes that haven't topped yet, Nasdaq 100, S&P 100, and Nasdaq Composite, have heavy influence from big tech stocks.
We also have double or triple tops on nine of the eleven S&P 500 Sectors. Of the two remaining sectors, only Technology (XLK) hasn't topped. Consumer Staples (XPL) doesn't have a double top, but it does appear to have topped--a double is not required.
As we were writing this article, the market made new, all-time highs intraday, but it reversed quite sharply, supposedly because of worry that the Fed won't cut rates this year. We prefer to think it had more to do with the technical problems (many negative divergences) we see on the chart below.
Conclusion: The superb performance of the technology sector, and Nvidia in particular, has drawn attention away from other areas of the market where the picture is not so stellar. While most of those areas are not yet in a ditch, price action is telling us to prepare for potential problems in the near future.
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