NASDAQ RALLY IS STALLING -- BONDS RISE WHILE DOLLAR DROPS -- CONSUMER STAPLES AND GOLD STOCKS ARE UP

NASDAQ 100 RALLY STALLING... Last Friday we pointed out the potential for a downside "key reversal" day, which took place on heavy volume. This week the Nasdaq 100 has been creeping higher, but on relatively light volume. In addition it has remained beneath last Friday's intra-day peak. Today's relatively steep selloff suggests that the short-term correction (or consolidation) that started last week isn't over. We think the NDX will probably challenge Monday's intra-day low. A close beneath that level would confirm a deeper downside correction. The daily RSI line continues to weaken from overbought territory near 70. Of more concern is that fact that the daily MACD lines are on the verge of crossing to the downside. On relative strength grounds, the NDX has led the market advance since the March bottom. Today, it's the weakest of the indexes. Any correction in the NDX would be a negative sign for the rest of the market which is weakening as well. Today's disappointing consumer sentiment numbers -- and another drop in the May PPI number --are pushing bond prices higher today and stock prices lower. The dollar is also weakening. That's giving a boost to gold and gold shares. Another sign that investors are turning a bit more defensive is the fact that consumer staples are today's strongest sector. MORE LATER.

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