Monday, June 21, 2010



Looking at the annoted chart above, you see three blue downward sloping diagonal lines under RSI, Stochastics, and MACD. During the same time period you have a horizontal line of support (black line) under the price. This 'divergence' is often a lead indicator of a larger impending move in the direction of the indicators. It is not 100% certain as nothing in technical analysis is, but clearly it is a time to be very cautious. Also, we have what everyone and there mother have been talking about, the "head and shoulders formation." I don't give too much credence to such patterns, but when many people start putting a lot of emphasis on something, one of two things occur: 1) The pattern takes on a life of its own and does not follow the consensus and the market does a fast and furious fake out and continues higher, or 2) the pattern slowly comes to fruition. In this case, I think #2 will be the case since we have a negative divergence in price and we have already had a 61.8% (1220 area) important fibonacci retracement from the high of 1576 to the low of 666.

So, once again, cash is king and by no means am I recommending you to follow my lead. I just want you to be aware of the potential scenario that is developing.

1 comments:

  1. Great article. Lots of good statistical information found right there. Interesting to see how much all those big blogs are making. Thanks for all your great posts.


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