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Since trends can persist far beyond a logical turning point, divergences are not market timing tools, but they are quite important in determining changes in character. We have shown the combined Cumulative A/D chart for the NYSE and Nasdaq several times on this site and in our newsletter, and we even pointed to the October 1997 & April 1998 tops as patent evidence of one of the most incredible negative divergences of all time; proof that the great bull market was in the process of ending. The divergence was too significant to ignore.

Above, we see another divergence that is too significant to ignore. Note that A/D volume for Nasdaq has climbed nicely in recent weeks and is well above the spring 2001 low. However, Nasdaq's Cumulative breadth is lagging way behind and is still far below the spring 2001 low.

There has been a celebration of Nasdaq's"resilience" recently, up 36% in only 35 trading sessions from the September 21st low. What has been lost amongst investors and speculators is the recognition that the Nasdaq Composite is still driven by the biggest names in the Index and does not attest to a brave new world for"growth" stocks. As well, Nasdaq was down 32% in the 35 trading sessions preceding September 21st and pointwise, is still well below where it commenced its awesome slide.

Judging by the pathetic performance of Nasdaq breadth, the recent rally does not augur good times ahead.



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