12.23.12 Sunday

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Previous article regarding the overall Market: “Market Crash Warning Signs For 2013”
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Dow Jones Industrial Average: Weekly

Here you can see on this chart that perspective and sentiment is VERY much BULLISH on the Dow Jones and there’s no question about it.  This primary uptrend line since 2009 has not been breached at all and BULLS have been soaring last 4-5 weeks but here are some signs of slow down.   We have two consecutive weeks of Shooting Star reversal at resistance and last week’s Shooting Star is backed by high volume.  Certainly it may not play out at all but caution is definitely there when it is backed up with unusual volume spike.

NASDAQ Composite: Weekly

Primary uptrend line since 2009 looks to be very strong and it has not been broken which suggests very bullish perspective and sentiment in the market.  However we have a warning sign flaring here but this time stronger bearish warning than Dow Jones.  Weekly Head and Shoulders and the formation is almost identical to 2007 formation before the crash.  Does it have to play out like 2007?  Most certainly not but I’d be cautious of these signals and I’d not dismiss them too quickly.

Couple candle sticks of Shooting Stars on Dow Jones?  I can ignore them easily if I see a good bullish trend with strength but a possible weekly Head and Shoulders? well now that’s a BIG deal.  When this is confirmed, we could see very sizable move to the downside and so I will definitely not going to ignore this sign so take heed and be warned.

S&P 500 Index: Weekly

S&P 500 looks to be the most bullish looking index out of the three.

We are just continue to rising higher and higher with order in these trading lanes.  This chart tells me that the market is healthy and very very strongly BULLISH however MACD isn’t so fond by the Bullish idea here or will not voucher the “healthy” concept on this index. Take a look at the Bearish Divergence that has formed on the weekly chart below.

(Weekly MACD Study)

2011 Feb – April, we had what it appears to be a slight bearish divergence confirmed on the S&P500 which later that lead to play out pretty steep decline in the market.  But concerning matter is that we have bigger scale of Bearish Divergence that has been formed March-September of this year.

Another alarming thing about that divergence is that Dow Jones Index and NASDAQ Composite index both also have confirmed bearish divergences on the weekly chart.  So this is where market is really pouring with these signals. All indexes with bearish divergences? I can live with couple candle stick reversals on the uptrend but these signals can be very dangerous when they are played out.

Bottom line is this.

Yes the long term uptrend support looks mighty strong and as long as the uptrend support is not breached, we are going higher and who knows we might do just that in year 2013 and that what I hope for.   But sometimes “hope” and it’s sentimental value does not register in the market because market doesn’t have emotions.  But let me tell you who does have emotions.  People have emotions and market reflects those emotions. Though market does not care about your emotions, the market will reflect those emotions of those who trade this market and that emotion is that the fear is starting to grip and gravitate on this market as we start to open up a new chapter for 2013.   Those chart patterns, candle stick formations and the indicator divergences are telling us something and I am hearing what they are communicating.

I will update more next weekend and hopefully I will have good news then.