Friday, April 25, 2014

Stock market sell signals triggered this morning

On Mon I wrote an article looking at the 3 major indices, the Dow, the S&P and the Nasdaq.  I noted that we were getting certain indications that the market is getting ready for a decline, citing overhead resistance on the Dow and S&P as well as declining MACD and RSI.  The Nasdaq, which has been the out-performer to the upside, has been getting hit much harder than the other 2 indices, which is not a positive sign for the future of the stock market in general.  I wrote on Mon that we should look for the Nasdaq to rally to about the 4200 level this week, and wait to see if it fails at that resistance level and begins to roll over.  That is exactly what has happened now.  Price rallied up to 4170 on Tue and consolidated there Wed, and Thurs.  This morning it has begun to break down and we have gotten a sell signal on the hourly charts.  Let's take a look...
Although all indices gave us the same sell signal this morning, we are going to focus on the one that is leading, in this case to the downside.  So looking at this chart we can begin a short position at these levels with a relatively tight stop at initial resistance where this weeks high was at 4170.  We had a recent low at just under 4,000 that has held, so that is our initial target price.  If support there fails, we could see price cascade down in 100 point jumps till it finds a level where buyers begin to step back in, but first things first, lets see how it reacts at 4000. 

-Jonathan M Mergott


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