Monday

Double Top Misnomer

Post a Comment November 9, 2009 – 11:19 am |   | Permalink |  Print This Post |

The Dow Futures is currently at 10125 - high of the night. We have seen multiple double peaks in the Dow in the past at the tops - though on many occasions “double peak” is a misnomer since the second peak is slightly (about 0.5-1%) higher than the first. This overshoot may be explained by the fact that many technical bears pulling the plug as the previous peak is breached. A cluster of stops would sit right above the previous peak - once triggered would result in an avalanche of buys catapulting markets higher.

The possibilities are:

1. Higher High (ie significantly higher) - 11500

2. Double Peak - whereby the peak could be 0.5-1% higher than 10125. We will put an order to short now at 10125 for $2/point, and another at 10210 (assuming 10200 is breached) at $2/point. 10210 will probably fit nicely with S&P pivot of 1090.

We wrote over the weekend that Monday will most likely see a rally right at the word Go! and (hopeful) for a pullback later. This is looking very likely. Our indicator is shown below. We will leave the interpretation to you. It APPEARS that when our indicator spikes up, markets pull back (even if its transient).

Sell Signal: Significant Top is here by www.theinflationist.com

Blue: Indicator

Red: Composite Index