Heading into Monday under mostly bullish market conditions--with price grinding higher over the past several weeks -- the SPY is flashing an interesting contrarian indicator. While price on the US large cap index has marched to successive higher highs and higher lows the OB/OS oscillator is diverging from price, with a lower recent high and now low. The lower volatility band has crossed above the long term Chaikin trend too. These patterns have preceded pullbacks of a few percentage points to multi-month corrections in the past. The market may be vulnerable to disappointing rumors and headlines about trade, as the Chaikin OB/OS oscillator on TLT has likewise diverged from lower bond prices setting up a possible flight to safety rally in the face of a risk off stock move. The magnitude of money flow into stocks relegates the likelihood of a repeat of last year's Christmas crash to small odds as evidenced by the market's bookie VIX index.
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