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Time To Short The Indexes?

We wanted to take a few minutes this morning to fill you in on a little index action that we are seeing develop.

First let's take a look at the short-term index charts.









With each of the charts, you can clearly see they all have that same look:

1. All are pushing resistance aside from post-Fed knee jerk reaction.

2. All have that abc down of A (Oct. Lows)

3. All have that ABC up (thru today) of a Potential B

4. All have a PINK Pullback Off Lows line which is the opposite of a bullish Pullback Off Highs pattern.

A POH is a Pullback Off Highs LONG Side set up and a POL is a Pullback Off Lows SHORT Side set up.

Don't get Elliott Wave? ABC's? No matter, all you need to know is support-resistance and those Pink Lines. At this moment in time any break of the pink line sets up a short sell in the indexes with a break into new highs being a stop. For us? We will continue to focus upon the issues that have broken uptrends and are backtesting those trendline breaks.

NOTE: Do yourself a favor and get used to what Pullback Off Low patterns are because when this bear market rally truely ends it will be the only game in town. You can find out more about this pattern here.

One additional note about the above charts. As you can see from today's peak you have the makings of a nano pullback off highs pattern. This means they could gap up up tommorrow to test the highs of today or a retest of the post-Fed emotional highs. If it happens then don't be suprised. It would also be a double top at that point too which is the first sign of a change in trend from up to down.

In Summary: Those pink lines are all you need to know. A solid break sets up a potential C wave down to the Oct lows if not farther. BUT we'll take it one step at a time.

While on the subject of double tops, we don't care what anyone says. A double top is a double top. It doesn't matter what time frame or frequency it is.

Now those of you who are more day-trader oriented ought to love this chart. For the rest of you it's still a great example of Chart Pattern Recognition. Learn the patterns and you can make money in all time frames and frequencies. Simple as that.




In our recent newsletters, we've talked about and shown you charts of the "follow the leader" stocks. Well, they all kinda fell apart into the close today. What's that phrase? Follow the leaders? Lead means both directions by the way. They lead the market up and they lead it down.

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