Wednesdays tend to bring trading ranges in the markets much of the time. But today’s slopfest in the S&P 500 and NASDAQ 100 was particularly gruesome. Nor were the two indexes able to conquer their resistance downtrend lines.

The NASDAQ 100 turned in another negative performance, and the S&P 500 ended the day up fractionally. But the Dow turned in a 520 point gain – almost 2% on the scale. The Russell small-cap index followed the Dow’s lead. So clearly, money is still rotating from the tech sectors to cyclical stocks.

But the concern is that the Dow is hitting resistance at the top of its trading channel, the Russell is hitting resistance at a double top, while the S&P 500 and NASDAQ 100 are hitting resistance at their downtrend lines. If the music stops here, there is only one exit, and it points downward. So I am still content to sit in cash. 

While I recognize that every dog has its day, and this is the Dow’s day in the sun after underperforming for years, it has not paid to buck the S&P 500 index’s trend in my career, though it may work for a short time. So I am not a current fan of a flash trend built on buying something cheap that does not have exponential growth potential. I will leave that to Warren Buffett.

In fact, this reminds me of one of those old market truisms. Where the generals lead, the soldiers must follow, or the soldiers could lose the war. Failure of every other index to confirm the 30 Dow Stock Index at new highs does not bode well for a healthy market, at least on the surface. On the other hand, the math is definitely complicated here. 

Breadth was still positive today, as there were a net 379 stocks that hit new highs versus new lows. Moreover, the percentage of stocks over their 50-day moving average continues to improve. All of this may still reflect the flipside of last summer and fall, where the generals carried the markets alone on their backs. Maybe the soldiers are taking the lead now, and the generals are so worn out they went back to headquarters. Only time will tell.

Given the circumstances, I cannot say with any confidence that this correction is over quite yet. Perhaps we might see the Dow head south with the NASDAQ 100 pointed north – the reverse rotation play. What I will continue to say for sure is that all of this is good for the markets, working off some of the giddy craziness. So far, and while I recognize it can be frustrating, the markets are not crashing, and the world is not coming to an end, as many have been predicting.

Even more interesting today, the markets seemed to yawn at falling 10-year Treasury rates after the auction. Congress has now reconciled and passed the stimulus bill, which *President Biden plans to sign on Friday. The market did not even poke its head up when the bill passed. The market did pop to the upside on the Consumer Price Index report right before the open. Inflation was tame, which triggered some short-covering to the upside, but the rally was short-lived. Anyway, inflation shows up in producer prices first, and it has not been tame there.

For now, I am still content with this roadmap from yesterday.