The Mask Market: Do You Feel Lucky?

The widening spread between the Dow Jones Industrial Average and some notably weakening parts of the market continues to be masked by headlines of stocks hitting new highs. 

Indeed, while it is true that the Dow is still chugging on higher for one new all-time high after the next, the negative divergences below the surface transcends mere cherry-picking of, say, the transports, and now extended to the biotechnology arena as both the IBB and XBI ETFs are slicing under their respective 20-day moving averages as we speak. 

On the one hand, this type of price action may merely serve to pass the time until Labor Day as a means of a long, summer slog serving to keep the indices afloat with lower risk rotations into the stodgy, old hat mega cap Dow stocks. 

But the truth of the matter is that risk appetite is clearly abating while celebrations of the Dow persist.

So while some standouts like CRM or FIZZ are intriguing on the long side, I am more focused on seeing if bears can actually gain a little traction to the downside when we see the slightest hiccup in Dow momentum.

Mind you, "the mask" is only a short-term concern for now, as we continue to closely track winners this year poised to attack the autumn months, such as BBY CONN SGMS, among others. However, a little bit of a reset in August may be just what the market needs at this point to work off these now-glaring divergences.