Sector Investing

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Market Tops are often preceded by a lower number of stocks in the market moving higher even as the market makes new highs. As such the Russell 2000 being a broader measure of smaller stocks would likely stop making new highs before the S&P 500:




Here we see the relationship again on a different type of chart where the action of the S&P 600 Small Cap Index/S&P 100 turns south prior to even the Russell 2000 and of course the S&P 500.



Same deal here. The Russell 2000/Russell 1000 should be advancing as long as the market is strong. It will often hit a top before the market actually does.



The next two charts show the NYSE and NASDAQ Advance/Decline ratios on ten day simple moving averages. While you cannot expect the advance decline line to continue on higher forever in a market advance when the trend breaks down it reflects the formation of a market top.

[chart]stockcharts.com/c-sc/sc?s=$NYAD&p=D&yr=1&mn=0&dy=0&i=p23423028322&a=0&r=7639>


Same thing here. Volume should be increasing to the upside into a healthy market advance. When a sell off is eminent the advance decline volume will break trend lower as well:




Same idea here. If the number of new highs is lower at a new high for the market then the market is at risk of a market top and bigger correction:








Finally for now the US Dollar has been declining as the market advanced. Recently it formed a bottom that may be significant. Time will tell if the dollar will advance further as the market declines. Eventually the inverse relationship between the dollar and the market will decouple in my humble opinion.



Some of these charts were inspired by the fine work at Leavitt Brothers.

http://leavittbrothers.com/blog/?p=2171

Much of this I have watched for years although probably not as closely Leavitt Brothers but my charts will continue to update!

RtS