A follow up to our 2/25 analysis of a very short term chart of the OTC Composite, The NASDAQ 100 is comprised of the 100 largest capitalization stocks that trade on the OTC Composite. These are the very stocks that have been all the rave on Wall Street. The few (20 or so) issues that have carried the entire index as well as the market in general are also the same issues that have endured the illusion that the bull market has remained alive and well. Of course, better informed readers know that nothing could be further from the truth, but that is not the point for today. We think it is compelling to look at this last fortress of bullish leadership, as it may represent the last stand before investors abdicate to the market trend reality that the day’s of wine and roses in fact could not and have not lasted forever.

What we want to point out is that while the price trend has remained higher, the rise has become more divergently narrow as prices have moved deeper to within the apex of an "ascending diagonal triangle". This is defined by Elliott as a termination rally of the impulse move that has been in force. Our own work suggests that this particular chart formation has perhaps the very highest probability of accuracy for leading to a trend reversal, around 90% of the time (working equally as well as a sign that a decline [descending diagonal triangle] is terminating).

INDICATORS: All three of the "momentum" indicators above show negative price divergence’s because they have NOT made higher highs to confirm the higher prices. They all peaked very early in January before volatility soared and the OTC Composite had TWO 10% corrections within a 2-3 week period.

30 Day Momentum is the top indicator. The failure to make a new high with prices speaks for itself.

The 10 (pink line) & 21 (blue line) day Rate of Change indicators are in the lower Middle. Notice how neither lines have confirmed the NDX’s most recent price highs, and the faster, shorter term 10 day ROC (pink) is actually is bearish. Finally, 14 Day RSI has moved above 70%, signaling that it is overbought, but more important is that it has also failed to confirm the price highs since the short term top of early January.

This by no means suggests that the relentless advance must come to an immediate end, but they do combine to strongly suggest the momentum is no longer supporting rising prices. This does, in fact argue for a down turn and break out of the lower support of the ascending diagonal triangle formation. We should know in very short order!