Need Further Declines For Confirmation of a Top

Click on Chart to Enlarge

This post is just to update a few recent posts. The chart above is the Dow ($INDU). This continues to look like and behave like an ending diagonal pattern. One feature of this pattern that is often present is called a "throw-over" where the final push up spikes above the trendline of the prior highs in the formation. That happened yesterday and then today is one of the stronger down days of late providing some initial evidence that the ending diagonal hypothesis may be legit.

The problem with most simple pattern analysis is lack of definitive rules and logic in the form of "if-then" confirmations. So in this case, I would say...."IF the above pattern is an ending diagonal, THEN point 4 must be broken below in less time than 5 took to form AND the whole pattern must be retraced in less time than it took to form." So right now, we don't even have the initial confirmation of a break of point 4. But the sentiment and technical environment certainly support the possibility that this will occur.

On a separate note, the TLT trade gapped in our favor today. For those adept with technical indicators, you can exit if/when the RSI(5) becomes overbought. I don't have a really good gauge of how high this could go in the event this little rally builds legs. But I will either post an outright exit when that RSI gets overbought, or suggest holding and trailing a stop up under support.

Also, for US Dollar bulls, today looks like a real nice chance to get in with low risk. It looks like today will be a 2nd consecutive long-tailed reversal candlestick at the lower bollinger band. You could buy (UUP, EUO, short FXE, etc) with a stop a penny below the lows of today. But I am not posting a trade on this.