Despite the fact that Dow finished in record territory, closer examination will show that DOW index finished in the lower half of the price range. Additionally, NASDAQ had a distribution day and ended the day in the red on higher volume than the previous day. Does this mean that the current rally is dead? No, this means we must exercise caution and realize that this is not a good technical situation. The market has been such that after bearish days, it is followed by a bullish reversal. It would not be too far fetched to think that this may be possible.
But the charts tell the story on the Dow and NASDAQ. Both are divergent and shows bearish implications. Perhaps this rally is losing steam. One day a trend does not make, but an astute trader will always heed caution at this point. Consider these charts above. Dow is hitting the upper channel line and finished in the lower price range. NASDAQ has broken through the uptrend line and is going down in higher volume.
If you are leaning too long or margined, it would be advisable to trim some underperformers. Be extra careful if you are considering adding or initiating new positions. Under no circumstances should you start a new options position in these circumstances unless a bullish confirmation happens. This market is confusing as I said before. It diverges technically and fundamentally but you must obey the trend. Dow is still in an uptrend while NASDAQ has broken the uptrend. I will continue to hold my positions at this point until further confirmation happens. Scary but that is when money is made.
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