Update: 5.20

I took the open off as I really am interested in the close. The Dow seems to be in a downward channel as seen here. Pay attention to these boundaries and see how this index reacts when it gets to the bottom channel. Yesterday was the time with the best reward to risk for entering your shorts so I hope some of you did.

The inability of the markets to fall could put the bearish call in jeopardy. Everything still points down, but if we have a strong rally tomorrow it would take us back to where the timing signal went negative and ultimately could cause it to flip back up. ┬áRight now we’re back in the congestion area indicated by the dotted lines.

Negatives I see with the Nasdaq

  • The 60 minute chart shows a RSI that is stalling near the 60 area (just as it should).
  • Bearish wedge
  • Volume has been declining each day after that first strong day of volume

I expected the bounce on the daily chart at the 50 day ma and now we’re in a wait and see mode to see if this bounce is the real thing. Just to be clear I am still short.


The percentage of stocks on the S&P that are above their 50 day ma has been in a steady decline for nearly 9 months. For that reason this is not a stand alone indicator as the timing is horrific, but it is worth nothing as the markets start to weaken technically.

The chart on copper is quite bearish and can be viewed as a microcosm for the economy in generals. The recent breakdown from a channel and subsequent rebound has this chart in a very precarious position. One caveat is this looks to easy of a trade.

Some of the best charts showing up on my scans tonight:

2 Responses to “Bulls Have a Chance to Steal Momentum”

  1. Joshua Says:

    Jeff, I see that you often highlight strong stocks breaking out on volume. However due to the nature of these moves, they are also extended on the shorter time frame. What is basic approach to entry and more importantly, risk management? With the extended position just having broken out, so you wait for a pullback, or use a stop that isn’t at the previous low? Thanks

  2. jeff pierce Says:

    Hey Joshua,

    Some of these stocks I really liked on the weekly and some on the daily. The weekly ones are stocks that are breaking out and will likely do well over the next 1-3 months and should be bought on pullbacks to their 5 or 10 daily ema. Some won’t pull back that far and those will be the big winners.

    But with my timing signal negative I won’t be buying anything long until that reverses. I was getting a watchlist together should the market firm up and not everybody who reads the blog likes to short, so I was providing them some options on the long side.

    On stops, I use mental ones and the stock in question shouldn’t go below the low of the day it breaks out. If it’s news or earnings related that should definately be the area one would look to exit should it retrace all the gains of the breakout.

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