Yes, I am starting to short stocks in this market: TWLB, AEOS, MDY, SYNT. The risk on the Dow/S&P is about 7% and the OTC about 12% (using the 200-day mov avg as reference). The market actually peaked in late March/early April according to the following signs:
1) The McClellan Summation Index has been declining since early
April for the NYSE and NASDAQ. It measures breadth in the
market.
2) The AIQ New High/New Lows Indicator (39-day moving total) topped
in early April. For the Nasdaq, it is back to January levels.
3) The RSI and Stochastic have been making successive lower highs
(about 5) since late March for the S&P and the other major
averages.
4) The short-term moving average (21-day) is flat to down for the
major averages. They are also converging on the 50-day moving
averages.
5) The database I maintain of IBD industry groups had 100 industries
making new 52-week highs in April 4, now it is down to 20.
6) The weekly RSI has been declining since April for the S&P and
Nasdaq which confirms declining momentum. What's left is for
the weekly Stochastic to give a sell signal for both by moving
out of the Overbought territory (the SK-SD has already crossed
over the prior week).
7) The major averages have non-confirmed the highs of early April:
Dow, SPX, Nasdaq, Transports. Dow Theory usually gives two months
from that time till the decline. The 50-day moving average has
been tested twice by the major averages and the IBD mutual fund
index (the mutual fund index may have broken it today). A
breakdown through it and the previous reaction low of 8860-8900
followed by an failed attempt to recover back above would probably
accelerate the decline. |
