All other trend following indicators remain on a long signal with negative divergences continuing to develop. There really is nothing to do at this point. The market is too overbought to consider new long positions. It seems premature to consider new short positions, although some stocks are setting up. The one fly in the ointment that I see right now is the financials. They just haven't broken down. The XLF remains above its 9/23 and 10/15 pivot lows. Until those lows are broken and the Dollar reverses above today's high, the rally will continue.
Wednesday, October 20, 2010
Still Working Toward A High
There is certainly a remote chance that the IWM has topped, but the general form of the action since last Friday is that of a 3 wave decline that dropped briefly below, underthrew, the lower trendline. We should expect the opposite to occur now, an overthrow, of the upper trendline. At that point, at least a one to two week correction should follow, if not a more serious decline.
Posted by R. Craig Pritchard at 9:34 PM