Market Looks Toppy | decision point

Despite the massive celebration of Nvidia’s earnings report, we’re seeing troubling signs that the market may be on its way to a top. Six of the nine major indices we follow have double top compositions, but the three indices that have yet to top their highs – the Nasdaq 100, S&P 100 and Nasdaq Composite – are heavily influenced by large-cap technology stocks.

We also saw double or triple highs for 9 out of 11 S&P 500 sectors. Of the remaining two categories, only Technology (XLK) did not take first place. Consumer Staples (XPL) does not have a double top, but appears to have one. No need for a double top.

As we write, the market is hitting record intraday highs, but has reversed quite sharply on concerns that the Federal Reserve will not cut interest rates this year. We’d like to think this has more to do with technical issues (lots of negative variance) as seen in the chart below.

conclusion: The outstanding performance of the technology sector, especially Nvidia, has attracted attention from other areas of the market where the picture is not so great. Most of these areas are not yet bogged down, but the price action tells us that we need to prepare for potential problems in the near future.

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