Doomsday Divergence from Hell

The Doomsday Stock Index Divergence from Hell

It has happened before that the industrial blue-chip index (Dow) diverged dramatically from the tech index (NASDAQ). Things typically do not end well when this happens.

Here is where we are today. The Dow Jones is being hit with massive selling pressure, producing a long string of trading days with lower highs, low lows and lower closes. Meanwhile, the NASDAQ is thrusting into new ATHs.

Here is where things stood just before the mortgage debacle and a 50%-plus decline in the major indexes in 2008. The DJIA topped in Oct 2007 and started down. NASDAQ rallied into a Nov 2007 top. This did not end well as the S&P Index lost 50% of its value.

The same thing happened before the internet stock debacle of 2000. The Dow peaked in Feb 2000 while the NASDAQ rallied into one more final high in Mar 2000. Things then did not end well.

NASDAQ then proceeded to lose 84% of its value in a bear market that ended at the Oct 2002 low.

History does not always repeat, but it often rhymes.

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