Look out below!
With the Dow Jones Industrial Average having spent the past week below the 200 day moving average, the 50-day moving average has been pulled down and is now almost certain to cross below the 200 dma during the month of August in what Technical Analysts call a "Death Cross" and not, it isn't better than it sounds…
Death crosses are clear indications that sentiment is turning bearish although it is possible that the Dow may power back over the 50 dma (17,900) and bend it back up before the fatal collision with the 200 dma – that would actually be a bullish signal.
The Dow has gotten back over our Strong Bounce line at 17,700 for the week (see Tuesday's predictions), so we'll cut it some slack for now but yesterday we got a little more bearish in our Short-Term Portfolio, taking advantage of a cheap roll to improve our SQQQ position. We also had another chance to short the Russell Futures (/TF) at our 1,230 target, so we took that but we also took $500 per contract and ran this morning as it's Friday and Friday's are dangerous days to trade the Futures.
As for the S&P, well the song remains the same on that index as we endure yet another prop job to take us back to our shorting spot at 2,130 (was 2,120 but moved up in May). Notice that there has been a much easier time using our system to short at the top than trying to guess where the bottoms are to go long (we don't like to go long when we're macro-bearish).
If you think we're going to breat this pattern, you have to be able to explain HOW we will break it? Certainly you can't expect any help from the Energy sector or the Commodity sector as both of those are completely in the crapper at the moment. The Financial sector lends money to Energy and Commodity companies who are in the process of restructuring their debts – that doesn't sound very promising, does it? Transports have been terrible (also affected by low commodity demand) and low Construction is why we have low…
