The stock indexes finished lower on Wednesday as the DJIA lost 56 points to close at 17,702 and the S&P 500 was lower by 6.72 to finish at 2,075. The Nasdaq lost 16 22 to close at 5,067 while the Russell 2000 was down 9.62 to close at 1,178.
This stock market rally is long in the tooth. There are negative divergences underneath this stock market. Stock prices can go higher only so long before those negative divergences take hold and markets head lower. There is not much buying power under this stock market.
In addition, one of the most powerful stock market indicators, the Monthly New High / New Low Index, is also trending lower over the course of 2015. In other words, stocks making new highs versus new lows are in a downward trend.
On Wednesday, Macy's(M) - Get Report reported earnings that missed expectations and the stock lost 14% of its value. The CEO said that there is an emerging consumer recession that appears to be taking hold.
This is happening at exactly the same time that the Federal Reserve is signaling that it will raise interest rates in December. The latest to give an indication is San Francisco Fed President John Williams, who said that he sees a "very strong case" for a rate hike next month.
If the Fed is going to raise rates in a global deflationary environment, this is setting the stock market up for one huge selloff in the near future.
In the meantime, it appears that the stock indexes will be setting up for an oversold condition on Thursday if the markets open to the downside. The markets should trade higher in the couple of days but, this should only serve to have the markets then trade lower again in the near future.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.