After completing the double top the Nasdaq started to experience weakness and negative divergence on the RSI foretold the recent declines. Had it not been the tragedy in Japan than was the catalyst it would have been some other macroeconomic news out of the Middle East…or even a weak economic report right stateside.
I know when the markets sell off like they have it’s human nature to want to jump in on the long side, but until my timing signal flips I won’t even consider that option because I want to have a safety net before I buy any equities. The last thing you want to do is position yourself on the long side and wake up to more weakness in the Asian markets, causing the US markets to crater. There will come a time when the markets are so stretched that it makes sense to get long…but now is not that time.
