Instead of hesitating I am going to just go ahead right now at 1219 in the sp500 and issue a BOT Short Signal. This could easily be another whipsaw but I am going with my gut feel right here and based on the way a lot of different chart elements are shaping up.
If I am correct then this may only be a very short term down move. I do have to admit that the bearish butterfly patterns are quite concerning to me. They have a lot of potential power and can be very precise in some cases.
Right now the market feels like the easy buy and that it will just keep going up forever. Usually when things reach such an extreme, the last sucker is buying the most expensive shares.
The huge gap up we saw about a week ago could possibly be an exhaustion gap and is at least a potential for some concern.
On the daily sp500 I see that the MACD histogram has moved into a bearish triple M stance which is so far unconfirmed. We would need a close below today’s low to confirm the MACD histogram sell.
The fact that there is even an MACD histogram sell setting up at this point is concerning within the context of the bearish butterfly patterns.
I will try to go into more detail on my thoughts here.
But this decision is somewhat of a quick decision now to issue the BOT short signal. It may leave me in the dust tomorrow, but I have to go with my 6th sense right now.
I did say in a previous post that I thought the sp500 would ‘reset’ the RSI back down to the 70 range which could be a new buy signal as the market appears very reluctant to give up much ground.
In a few days that may exactly be the case. But for now I would like to try the short signal. The long trade just seems too crowded right now and there are at least some beginning signs of some type of pull back or gap fill.
The big gap we had actually is somewhat similar looking to the late April 2010 gap. It is probably incorrect to say the two time periods are exactly the same, they are not. But it does leave one to at least consider the possibility that we could be dealing with an exhaustion gap and that could cause a gap fill and then some more volatile trading as the market tries to figure out if it is at a top here or just a mini correction before a new leg higher.