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.
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.
ReplyDeletesavings