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That is, there have been many sessions in which one index has climbed, while the other has declined. Broadly, they move in tandem.
Is the divergence a new normal or a sign of trouble?
For insights, Jim Cramer turned to technical analysis from Carley Garner, the co-founder of DeCarley Trading.
Looking at trendlines, Garner says the divergence rarely lasts any significant length of time. Ultimately, the indexes reconcile and again trade in tandem.
Of course, that begs the question, will they reconcile higher or lower?
Although Garner sees reason to believe the Nasdaq can rally modestly in the short-term, she says that over the long-term, the technicals suggest the path of least resistance is lower.
Looking at historic trends in the chart above, Garner finds that more often than not, when the Nasdaq 100 and S&P 500 have diverged, the Nasdaq has served as the leading indicator, not vice versa.
In turn, that would suggest current weakness in the Nasdaq should be viewed as a precursor to forthcoming weakness in the S&P.
However, that's not the only pattern that Garner finds bearish.
Looking at the moving average convergence divergence line, or MACD, an important momentum indicator that analysts often use to predict where a security is headed, Garner says that even when the Nasdaq has stabilized the MACD continued to decline. That's a bearish sign.
Also, she says the Nasdaq is nearing strong levels of resistance on the upside. She notes the first level of resistance is 3,742 while the second level of resistance is 3,813. Largely, trendlines suggest to Garner that the ceilings will not be pierced by a short-term rally. In turn, Garner believes the subsequent selling could be brutal.
Turning attention to the S&P 500, she says the index has been trading in the same upward channel for a year now, and at the moment, the high-end of the channel forms a ceiling of resistance at 1,930. Garner believes the chances of the S&P breaking out above that 1,930 level are pretty slim.
In addition, Garner has analyzed the seasonal performance of the S&P 500 over the last 10 years, and found that from May through October the S&P's performance has been weaker as compared to January through April. Therefore, she believes investors may follow the adage and "sell in May and go away."
All told, Garner would proceed with caution. At best she's skeptical.
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Cramer isn't quite so bearish. He believes that the divergence between the Nasdaq and the S&P 500 has everything to do with a rotation out of Internet growth stocks, which largely trade on the Nasdaq, and into dividend yielders, which largely trade on the S&P.
"I don't believe in sell in May and go away," the "Mad Money" host said. "But Carley Garner is a terrific technician and her chart work warrants serious consideration. Frankly, given the speedy run to record highs, there's nothing wrong with a little caution here."
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