Dow 20k fail (Again) - Bearish Divergence
Updated
There are signs a top may be forming here. We've had a very extended bull run, and now we're beginning to see very clear divergence between price and RSI on the daily.
Divergence alone is not a setup. Divergence can continue far longer than most people are prepared to hold a drawdown. It's just a reason we might look for more defined setups to trade.
The key here is on Friday we made a new high in price but not RSI, tantalisingly reachin 19,999.6 on the cash index and frustrating those calling for 20k again.
On this timeframe, you'd look for a daily candle to close below friday's (last candle in chart) low (or more cautiously, Thursday's low [penultimate candle in chart])
This should set up a correction of the Trump rally. However w must remind ourselves that the long term bull trend is still a strong one, and - in my opinion - we've no good *technical* reason at this time to believe any move down is anything but a retracement.
Also be aware that we've been ranging (red horizontal channel). Breaking that lower bound of the range is further confirmation that a bigger retracement is likely. It's likely any sharp move down will come back to retest the range as resistance, providing more opportunities for entry.
I leave you to pick target levels for yourself based on entry if you see confirmation of these bearish setups, but personally, I think a return to at least 19,000 dow would not be surprising, should price action confirm the divergence.
Divergence alone is not a setup. Divergence can continue far longer than most people are prepared to hold a drawdown. It's just a reason we might look for more defined setups to trade.
The key here is on Friday we made a new high in price but not RSI, tantalisingly reachin 19,999.6 on the cash index and frustrating those calling for 20k again.
On this timeframe, you'd look for a daily candle to close below friday's (last candle in chart) low (or more cautiously, Thursday's low [penultimate candle in chart])
This should set up a correction of the Trump rally. However w must remind ourselves that the long term bull trend is still a strong one, and - in my opinion - we've no good *technical* reason at this time to believe any move down is anything but a retracement.
Also be aware that we've been ranging (red horizontal channel). Breaking that lower bound of the range is further confirmation that a bigger retracement is likely. It's likely any sharp move down will come back to retest the range as resistance, providing more opportunities for entry.
I leave you to pick target levels for yourself based on entry if you see confirmation of these bearish setups, but personally, I think a return to at least 19,000 dow would not be surprising, should price action confirm the divergence.
Note
so the uptrend looks broken as we reach the end of today, 10th January. BUt the channel is still intact. Plenty of volatility today, seems like some bear stops being run and some bulls being trapped.We're still looking for a good break lower, but aggressive traders may already be in shorts. Should be a good runner, if we can get lower this week.
Note
Goodness me they make it hard for us don't they, but today (12th January) has begun well for the bear and we're now beloe those friday lows that have been so stubborn this week. Of course, it's the daily candle close the concerns us most, plenty of time for this to bounce again. Let's see how we do. I'm still short.Note
Still short longer term,, Channel bottom held again last week, provided a good level to trade around intraday, so chart still working for longs and shorts on multiple timeframes.Note
Long positions here now, closed all short positions on Us indices. Will re-evaluate from top of channel, but intraday (19th) Jan we keep trading the channel, at the bottom means long :)Note
Well I think that's what the market was waiting for me to do, go long ;) Now we've broken the underside of the range, should start to set up some bearish moves, but we're not away yet. Will be looking for shorts off the underside of the range.Note
So after a slow premarket we opened with a real rip, breezed through the underside of channel. The most obvious of technicals indicate a turn on longer time frames, but at the same time, there's plenty of room for a sting in the tail.Just trade carefully here, using that channel bottom 19800 as a guide. If it's going to act as support today, you may find it sets of a run to the top of the channel again, and maybe even the mythical 20k (now everyone has finally shut up about it :D )
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