There are a lot of people worrying about a major market top, and there are just as many (mostly in the fundamental camp) confident that we’re on the verge of another major up leg. We can see the logic of both positions, so how can we sort it out? While we need to be aware of the fundamentals affecting the market, we are technical analysts and we need to keep our focus in that area, believing that will give us a solid foundation for our decision-making.
At a very basic level the technicals are negative. Two of our favorite indicators, the Price Momentum Oscillator (PMO) and On-Balance Volume (OBV) have formed negative divergences versus price. A negative divergence is when price makes a top above a top and the indicators make a top below a top. The PMO is the result of a rate-of-change calculation, so it is not so easy to immediately visualize what it means, but it is basically telling us that price is losing internal strength.
