Weakening Within a Range

The top chart of the ES futures nicely shows how the attempt to break below the multi-day trading range in early morning trading on 8/12 led to a snap-back rally back into the range--and eventually a retracement of the entire range. We now are sitting at important support in ES, near bull market highs.

Despite this resilience, non-confirmations are accumulating. Emerging market stocks (EEM; bottom chart) are well off their bull peaks. I notice on Thursday that we only registered a little more than 1100 new 20-day highs among NYSE, NASDAQ, and ASE stocks. That number was over 2700 late in July and over 3100 on 7/23. That suggests a narrowing of the rally's base.

Indeed, we're seeing potential non-confirmations from a number of S&P 500 sectors, including XLP, XLV, XLE, and XLK. That doesn't mean we can't see higher prices in the days ahead. It does suggest, however, that--unless the rally broadens--we could see any such new highs end much like the 8/12 downside break, keeping stocks in their extended range.
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