$INDU MAKES A DOUBLE TOP (SO FAR) -- COMPARING THE 2000 AND 2007 TOPS -- THE $COMPQ AND $SPX ARE WELL ABOVE THE 200 DMA -- $LUMBER GETS STUCK BELOW 40 WMA -- BUILDING AND CONSTRUCTION TEST THE UPTREND -- $BRENT DIPPED BELOW THE SUPPORT LINE LAST WEEK

$INDU MAKES A DOUBLE TOP (SO FAR)... The Dow has made a double top so far as seen on Chart 1. Does this seem important? Here we sit with a potential $INDU double top and only 3 days from the high. Google, the big market leader is down almost 14%. While anything is possible, should we expect a solid bounce by both the $COMPQ and the $SPX at the 200 DMA to go back and test the highs? This does not mean it has to get all the way to the old highs. If the $INDU wasn't so alone on this run, I might agree with the argument of a final high. I will say that the down thrusts are getting stronger and longer. One thing that I view as important is the pattern of this high relative to the 2007 high. Points 1,2,3 are very similar as I have explained them on Chart 3 below. Currently we are just over 60 days between highs. The time between tests is similar to both 2000 and 2007

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Chart 1

COMPARING THE 2000 AND 2007 TOPS... When I investigate how the markets topped in 2000 and 2007, a few things come to mind. You would normally expect at least a test of the 200 DMA before the market fell apart. On Chart 2, the year 2000 top, The $INDU touched the 200 DMA before finally topping. Actually, both the $INDU and the $SPX touched their 200 DMA before they topped. Only the $COMPQ had not tested the 200 DMA before making an ultimate top. The $COMPQ in 2000 made its high in March along with the $SPX (different day). The Dow topped earlier in January 2000 as had MSFT (Dec 31, 1999) the big market leader at the time.

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Chart 2

In 2007 all the markets had visited their 200 DMA's multiple times before finally rolling over to confirm the top months before. While the structure shown in Chart 3 looks very similar to the Dow now, the $SPX and $COMPQ don't look nearly as ominous. At Area 1, $INDU found support well above previous highs. At Area 2, it started hitting resistance. It finally surged past, only to roll over and test the 200 DMA at Area 3. On the Area 3 low, the previous highs did not hold as support, but it quickly rallied higher. It surged up again to make a new high and topped at Area 4 with the other 2 indexes in October.

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Chart 3

THE $COMPQ AND $SPX ARE WELL ABOVE THE 200 DMA... Just to reiterate the point, the 200 DMA's are still well below the other two indexes.
We'll see if the $COMPQ finds support here at the 50 DMA which is shown in Chart 4.

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Chart 4

$LUMBER GETS STUCK BELOW 40 WMA... Some commodities that are early indicators of demand are breaking down. $LUMBER is an early indicator and the chart is definitely weakening. The major uptrend line that had the most touches is clearly broken as shown in Chart 5. The dotted green line still shows an uptrend with a much lower slope. The green line has less touches but support is there as long as it is not broken. Currently $LUMBER sits under the 40 WMA.

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Chart 5

BUILDING AND CONSTRUCTION TEST THE UPTREND... This Building and construction ETF is looking a little tired as shown in Chart 6. As you can see, the support has now become resistance above the price action. This is concerning with the lumber chart shown above and the homebuilder chart below.

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Chart 6

We can also look at the Homebuilders ETFs. These have been on a nice uptrend but the trend is being tested now as shown on Chart 7. Whether or not they hold up is a good question. Here the uptrend has now become overhead resistance on ITB. We'll watch to see how these play out, but the are looking weaker with each passing week. It would be nice to see a firm bounce off the trend line hold.

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Chart 7

$BRENT DIPPED BELOW THE SUPPORT LINE LAST WEEK... This chart of $BRENT troubles me a little bit. $BRENT is considered to be the world index for oil prices. Recently, the last nine months shown on Chart 8 has all the price action taking place inside the shaded blue triangle. While we are reaching the end of the pennant, the last few weeks have had tests below the trend line. This bottom edge of the triangle is starting to become very important. What worries me most is the similarities to other commodities breaking down week after week. $COPPER, $SILVER, $GOLD, $LUMBER. If global demand is that weak, that will be the headwind the US market is talking about. The MACD is building energy like a calm before the storm.

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Chart 8

LATIN AMERICA FUNDS DOMINATE SCTR MOVES TODAY... Almost every major ETF with big SCTR moves higher today were related to Latin America. Brazil, the Brazilian Real, Latin America broad ETFs, were all included. This screen shot of the SCTR ETFs on the home page shows just how dominant they were.

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Chart 9

BRAZIL ETFS ARE PARTICULARLY ACTIVE... Brazil has taken off like a rocket to the moon as shown in Chart 10. Is this the buildup to the World Cup?

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Chart 10

Enjoy your evening. As Arthur mentioned, he will be on vacation for the next two weeks. He did post a market message today related to the MTA conference in NYC. You may wish to check that out as well.
Good trading,
Greg Schnell