Tuesday, November 09, 2010

Stock Indices - Bearish Engulfment


Stocks opened higher today but ended the day in negative territory. If you look at the above daily chart of the S&P, you will notice that we now have a bearish engulfment which is a reversal pattern. What I find significant about this is that this engulfing pattern took place at the April high. A move below today's low will confirm the pattern and suggest that stocks may be under some selling pressure in the days to come.

As you know I've already liquidated half my long position the other day when the S&P first tested the April high but am  holding the balance of my position into the new year if the current bull market holds up.

I'd like to see stocks pullback here so that I can add to my long position. If the market does indeed sell off, I will be on the lookout for technical buy signals which I will post  on this blog when and if they do occur.

5 comments:

Chris said...

Thanks Kevin. Appreciate your postings.

Michelle said...

I have a similar view of the stock market. I also sold 1/3 of my position in the market last week. I am hoping for a sell off. My question to you is when would you start adding your 50% in cash into market? Are you waiting for S&P500 to reach 1040 again?

Anonymous said...

I agree that we are in a process of putting a major top. I see the sentiment conditions analogous to April 2010.

The only thing I'm not sure if we are at the point of early April, mid April, or late April. I'm thinking mid April and stated some short positions but so far I'm not willing do do anything highly leveraged.

One more thing. CSCO sold 15% after-hours this night. Could this be a catalyst to break the record high market sentiments?

Jack

Kevin said...

Let me make one thing clear, I am NOT looking for a major top. I am simply taking profits here as I think the makret is due for a pullback. I am still bullish which is why I am holding 50% of my long position. I am looking to add on a pullback followed by a technical buy signal.

Kevin said...

Jack,

Cisco might be the catalyst for a pullback not a major top. The bearish engulfment yesterday might have been the hint that something bearish is about to take place.

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