Chart of the Day - Wednesday, February 7, 2024

🏆 Today’s Chart of the Day was shared by Brian Shannon (@alphatrends).

• Momentum and breadth indicators have recently begun to diverge from price, suggesting the rally is getting long in the tooth. In addition, the bulls no longer have a seasonal tailwind at their backs.

• While breadth, momentum, and seasonality warrant some caution, Brian reminds us that the trend is the final arbiter.

• The S&P 500 ($SPY), Nasdaq 100 ($QQQ), and Semiconductor Index ($SMH) are "innocent until proven guilty" as they're above their 5-day moving averages. On the other hand, the Russell 2000 ($IWM) remains below its 5-day moving average, making it "guilty until proven innocent."

The takeaway: Divergences are beginning to stack up as the rally matures. It's important to be aware of these bearish developments, but acting on them is pointless until the short-term trend turns lower, which hasn't happened yet.