On the last few days of the rally, Dow Jones has seen a lack of demand, at new highs. This indicates institutional traders probably aren’t very bullish about the market. And without professional support, I don’t see this rally going very far.
In DAX 30, there are evident supply signals. Stalling prices and high volume mean there are large selling orders swamping the market, or else why would prices not go up instead of stalling, if this was true buying?
So if the institutional/professional traders are withdrawing from the general stock market, where are they investing? On times like this, smart investors usually allocate their money to the so called defensive stocks – mostly the Food & Beverages and Tobacco sectors. Many times before major downturns, you will see strength in these sectors.
Looking at the ratio (relative strength) Food & Beverages/Dow Jones, it’s rising since early 2014.
The same is happening on tobacco stocks.
Everything considered, these aren’t healthy signals for the stock market, to say the least. We’re still in a low interest rate environment though, and on a bull market, so I’m definitely not shorting; but I’m surely reducing my long positions for now.