Friday, November 12, 2010

Sell signal for Dow

Indexes were in serious trouble today with SPX moving bellow 5 days SMA for the first time since the beginning of the rally. Yet by the end of the day SPX managed somehow to move above this level (1197) but EMAs are touching each other. If you really zoom in you can say that they are actually crossing each other a little bit but let's not get too enthusiastic here. If you look at SPY or SSO, EMAs are just touching each other.

While taking profit on the long side is not a bad idea I want to see a better "sell" signal on Monday to go short. When indexes stop exactly at the five days SMA or EMAs are just touching is hard to call. On October 4th we had a similar situation, 5 days SMA was challenged and EMAs almost crossed yet bulls managed to push SPX up next day and cancel a potential sell signal. This time there is more bearishness since SPX slipped bellow 5 days SMA intra-day but bulls can turn the table in their favor on Monday. Once the "point of no return" is touched bulls can't stop the downtrend but we are not there yet. At least for SPX!

Dow on the other hand show clear EMAs crossing and price is bellow 5 days SMA. Nasdaq looks a little bit less bearish than Dow but it shows a small bearish EMAs crossing and has also slipped a little bit bellow 5 days SMA. Russell is the most bullish looking index, above 5 days SMA and EMAs not touching yet. We need to keep an eye on all these indexes but I still trust SPX more than any other index.

Monday is going to be a decisive day. Even a slightly drop in SPX is going to give a sell signal. 


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