Friday, August 13, 2010

Stock Indices Close The Week WIth Bearish Engulfments

Stocks closed the week pretty much at their lows forming what is known as a weekly bearish engulfment. All the major indices formed bearish engulfments which is an indication of a complete change in market sentiment. The 5 week advance that rallied the market last month stalled at key resistance and abruptly headed south..

The downside objective for the stock market in my opinion would be a test of the summer lows.  There are some groups that are already breaking the summer lows such as the semiconductos (SOX) and regional banks(KRE). I'll post more about these groups a little later.

1 comment:

Anonymous said...

Broad in terms of breadth yes, broad in terms of Nasdaq and Russell participation, I beg to differ. Look at the DJI and the SPX on their daily charts, both closed above the 50 day MA. Look at the Nasdaq and the RTY, both could not even breach their 50DMA (the RTY closed almost 2% away). This tells me that this rally was actually narrow and until we see Nasdaq and Russell participation, this is nothing more than a short squeeze. I am shorting this looking specifically at regional banks, semis, hard disk drives, homebuilders, mortgage finance and yes, small caps. You normally catch these divergences... surprised you didn't post about it!


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