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|Includes: DIA, SDS, SH, SPDR S&P 500 Trust ETF (SPY)

As you can see in the chart below the last time we had a negative divergence on a weekly chart it did not work out so great. Notice how in 2007 there were three peaks and then a huge sell off. We are up to two.

I am keeping an eye out for number three. Initially it will look great because we made a new high, but if the momentum indicators look similar to 2007 I will go to DEFCON 1. Believe you me, you don't want to go to DEFCON 1.

Right now my long term indicators are still on a buy signal. Unfortunately it will take a pretty steep sell off to put it into a sell. But that is the sacrifice you make with a trend following system.

Shorter term I have seen evidence that makes me think we will go lower in the near future. I saw a ton of bearish engulfing patterns a few days ago and yesterday there were a ton of high pole warnings on point and figure hourly charts as well. Those are basically breakouts that fail.

Keep an eye out for number three. Remember, three is the magic number.