30,000 ft view

Weekend scale out of the charts

The last few weekends I've been scaling out the charts to show the trends that are pretty obvious.  I'll do that again this weekend and I'll point out the continued topping of the DJIA.  My calculated scores haven't changed much this week.  I think the flatness of the week has a lot of people guessing whether or not the top is in.  The question du jour is whether or not sequestration talks will frighten investors traders enough to sell the market.

Daily scores:

Weekly charts:

Above is a weekly chart (each candle represents 1 week of time) of the DJIA.  The topping indications are still there.  We see a weaker candle, downward sloping RSI, very overbought indications on the Slow Stochastic, darker green histogram bars on the MACD, and bollinger band %B that is retreating from the 100% level.  All of these indications indicate, to me, that the market is at the precipice of a short to medium term cliff.. a stiff breeze could push it over.

The S&P 500 chart above is similar, but not exactly the same as the DJIA.  The main difference is that the candle for last week is not necessarily weaker than the previous, and the RSI has not rolled over yet.

Above is a weekly chart of the NASDAQ ETF ($QQQ).  I'm seeing the formation of a reliable chart pattern... the head and shoulders.  It is a bearish pattern.  The right shoulder has not yet formed, but this is often a strong signal if it does complete itself.

Last, but not least, is the Russell 2000.  Small caps have had a blockbuster run and have busted out of the pattern they were stuck in.  Last week's candle was not weaker than the previous, but it doesn't take a rocket scientist to see that this thing has gotten "a little to big for its britches" (that's a common Texas saying for my readers in other states or countries that may not get the reference.)

The bottom line is this:  it's been a good run, don't get greedy.  Secure some profits.  Since I turned on the "red light" there has been very little movement either way.  The RumWave has had a pretty strong track record of identifying good times to protect gains.. I suspect this signal will be no different.