Are the Markets Near an Inflection Point?

Wednesday I heard about a (new to me) ETF — the XLG — the Invesco S&P 500 Top 50 ETF.

Let's check out a few charts and indicators of this ETF, which invests in the underlying index consisting of the 50 largest companies in the S&P 500 Index based on float-adjusted market capitalization.

In the weekly Japanese candlestick chart of the XLG, below, I see a mixed picture. The shares have made a serious rise the past two years. Prices trade above the rising 40-week moving average line. 

Trading volume has been heavy in the past three or four months. The weekly On-Balance-Volume (OBV) line shows a dip and a fresh new high. 

The 12-week price momentum indicator in the lower panel shows me a bearish divergence with weakening momentum readings even as prices make higher highs. The recent candles have the making of a top reversal pattern. A bearish or red candle this week may be good enough to create a top reversal.

In this daily Point and Figure chart of XLG, below, I can see an upside price target in the $61 area but a trade at $39.95 will weaken this chart.

In this weekly Advance-Decline (AD) line of the S&P 500, below, I can see a small bearish divergence between the price action and the AD line. This bears watching the next several days to see if breadth weakens further.

Bottom-line strategy: A sentiment extreme has me worried. There is a surge in meme stocks, again. I am seeing lots of commercials on TV and X for trading advice. Are too many novice traders entering the markets? 

Speculative names are topping the most active list with an anecdotal photo/story of an NVDA license plate on X. A few neighbors have asked me about Dow 40,000...

I am sure TheStreet Pro readers can come back in the comment section below and cite a number of bullish indicators — I expect pushback on unpopular positions.

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