The other chart is the obvious top in the Dow Jones Transports showing a up-sloping trendline that if broken, will spell certain doom for the economy in my opinion. It’s ironic that I’m seeing bearish patterns in the charts when I’m still long a few positions, but the action over the past few days has been a head-scratcher and it’s better to be hedged when you find yourself in that position.
The last thing I wanted to do is exit my longs only to see the market do exactly what I thought it was going to do…which is go up. So if you’re wondering why I hedged with some short etf’s when my signal remains long…there is your explanation. My hope was that my longs would bounce intraday and I could get taken out with small gains while I wait for the market to give a down signal. I would also use the number of new longs that show up on my bullish scans (or lack or) as an indicator of the future direction of the markets and I haven’t added a single bullish stock over the last 2 days. Another bearish signal.
So far we’re still well above where my timing signal issued a buy signal and to the signals credit I was warning people to become defensive last week when the markets were very overbought.
