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The current set-up on the stock indexes is nearly ideal for a short trade from my perspective. The weekly stochastics on SPY is overbought. The daily is overbought. And the hourly MACD is overbought with bearish divergence. The pattern is weakening, but may have another slight push to new highs to form a "3 push pattern" on the hourly chart.
We are now seeing lots of confirming evidence for a top in addition to the price indicators. Of note
-very sharp bearish divergence in breadth/McClellan oscillator
-low put/call ratios this week consistent with prior intermediate highs
-2 of the lowest volume days in over 2 years excluding holiday trade. This indicates waning demand or participation buy the big money.
This weekend we will get the data on the "smart" money action in response to the rally over the last week. If we see another jump in smart money selling, then in combination we have a powerful case for initiating shorts or liquidating longs on any technical sell signal.
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