This Chart May Put the Brakes on the Bullish Train

Potential Consolidation is Near - Daily Levels for May 12th

The stock market continues to move higher; the SPX and NDX marked new all-time highs led by another semiconductor rally that left a daily gap below. This was the case for SMH and MU, though the latter printed indecisive price action. Similar patterns were observed in INTC, AVGO, and AMD, where “doji” type candles formed at the top of the current trend, breaching the upper Bollinger Band.

Anyway, the primary concern is not the euphoric move in semiconductors, but the continued deterioration of market breadth. The percentage of S&P 500 stocks trading above their 20 and 50-day moving averages remains in decline.

Ok, conditions can persist for a long time, including breadth deterioration or continuos euphoria; that said, the most critical chart today is a move I anticipated in the Weekly Compass last Saturday. Today’s publication brings the warning and provides access to the daily levels to watch tomorrow. Remember: levels provide validation.

Bulls and bears alike must be aware of this major move: