No, I’m not shorting it or buying DXD, or even calling for a drop. I’ve learned my lesson. Today I would merely like to point out that from a technical standpoint, I would rather close my eyes. I'll use a 5 month chart to illustrate:
First, I’ve set 4 vertical areas showing bounces off of the mid-Bollinger Band. You can clearly see how the inclines slowly become less steep until they level off. This is normal and can happen with any stock, but when it coincides with a negatively correlating MACD, it normally spells trouble. As the inclines level off, the MACD gets worse, and we see downward slopes.
Second, I’ve shown were the MACD should be with a horizontal purple line, if the DJIA was at 12,200. But the DJIA is at 12,500, so the MACD should be even higher than the lower purple line—it’s not.
Third, I’ve shown with a green line that the DJIA keeps rising while the buying pressure weakens. This indicator, called the Chaikin Money Flow, shows a clear downtrend in buying pressure. We are not below the zero line yet but the trend is clearly down.
The one thing in the Dow’s favor is it's RSI, which is below 60.
There is much less information on the weekly chart, although we do curiously see a crossover on the MACD. This would normally coincide with a fall by now; make up your own conclusions as to why it hasn’t yet.
The message I’m trying to get across is not to short the Dow, but rather to trade carefully. I don’t like what I see, nor should you.
-Chris
4 comments:
tend to agree with you here. Would you get in cash or change to let's say PM or commodities?
I hate to advocate cash, but it would be reasonable for anybody to take some risk off the table.
Commodities do seem a better option, I recently took a position in light crude.
rotation baby, that's the word
love your blog, can you post some more of your research too?
Post a Comment