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Squawk Morning Briefing: Divergences

On Monday, the S&P 500 and DJIA showed divergent behavior with the broader large-cap index making new all-time highs and the benchmark index of 30 stocks failing to do so. This is a reminder of several important considerations:

  1. It remains earnings season. The report from MCD was poorly received and a significant sell-off that, all things being equal, would have resulted in a decline in the DJIA of over 20 points.  With the S&P 500 closing up by more than 3, we can see that would it not be for MCD the two indices might have had much more similar results.
  2. While it is unusual for the the S&P 500 and the DJIA to generally head in the same direction, it is not uncommon for them to exhibit different wave patterns as we approach important turning points.  That is, we would not expect to see one index in a strong uptrend for several days while the other is in a strong downtrend.  However, even on Monday we could see that the two were not dramatically out of sync yet the S&P 500 made new all-time highs while the DJIA did not.  Over the coming days and weeks we may need to consider the idea the two might turn at different points even if the general price action is similar.

That last point is not to say that a major turn is immediately at hand.  The trend remains up until we see signs otherwise.  Today’s videos have our latest view on what we are looking for.

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Elliott Squawk delivers thorough market preparation every morning in time to take action during the trading day. By combining up-to-the-minute futures activity with traditional end-of-day analysis from cash indices, you receive analysis based on the latest conditions as the trading day sets to open. Each issue of Elliott Squawk goes beyond traditional Elliott Wave analysis because we recognize that trading Elliott Waves is much more than just looking at the most likely current count. Squawk will prepare traders to assess the market action as it unfolds by answering questions that any Elliott Wave trader should consider:
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