The Daily Chartist: The Nasdaq and Dow Part Ways

The Chartist says this divergence means even more volatility is ahead.
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The funny thing about yesterday's

divergence between the

Nasdaq

and the

Dow

is that the Nasdaq is following a script almost exactly. Here's how the story goes: A market rallies, has a correction of some magnitude and then rallies back to its old highs. The rally back to the highs becomes quite important, as we can then measure the quality of the rebound.

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transcript of Jan. 18 Q&A

So far, the Nasdaq made a new high on the first trading day of this year, declined by almost 10% and rallied back to old highs. Now that we have something to measure this rally against, it's not stacking up quite as well as it had been. I'm sure most of you know this instinctively, but the statistics show what your portfolios already know: Many of the highfliers have not made new highs with this rise -- and here lies the divergence.

I continue to believe that this divergence will lead to another swing back down and that these wild swings will be the norm for a while.

New Highs and New Lows

Overbought/Oversold Oscillator

Cumulative Advance/Decline Line

Helene Meisler, based in Singapore, writes a technical analysis column on the U.S. equity markets on Tuesdays and Fridays, and updates her charts daily on TheStreet.com. Meisler trained at several Wall Street firms, including Goldman Sachs and Cowen, and has worked with the equity trading department at Cargill. At time of publication, she held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback at

KPMHSM@aol.com.