| Negative divergence on Nasdaq, S&P 500 and Dow |
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| Written by Our Staff Writer |
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October 24, 2011: The three major indexes--Dow, S&P 500 and Nasdaq 100 have formed negative divergences indicating that the rally may end and markets turn lower. A negative divergence is formed with the prices rally higher but an indicator such as commodity channel index (CCI)or relative strength index either does not make a new high or falls lower. This essentially shows that the rally is getting weaker and could fail. During such times bulls refrain from buying or take profits on long positions and bears initiate short positions.On the S&P 500 and Nasdaq 100 the CCI has turned lower on the daily charts, while the indexes rallied. In the case of the Dow, the index rallied to a new recent high, but the CCI could not make a new high. These don't augur well for the bulls. Please check the charts of the three indexes below: S&P 500
Dow Nasdaq 100
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