The DOW is making a new weekly high today but the S&P 500 and NASDAQ are not which is setting up a case of bearish intermarket divergence. We are now in a strong reversal zone for equities and, as I mentioned in last night's blog, both the DOW and S&P 500 are well into our target areas for a top. For these reasons I am going to enter a short position in the broad stock market today. We can set a tight stop loss on the S&P 500 and NASDAQ making new weekly highs (i.e. the S&P 500 breaking above 2,009 and the NASDAQ above 4,746). I would like to note here that there are now some technical signals suggesting that if we do get a correction it may not be that severe so this trade could turn out to be short-term. Directional momentum is now mixed bullish and bearish in the broad stock market and we need to be open to the possibility of it suddenly turning more bullish.
Crude oil broke above $38 today which was our minimal target for this rally. Tomorrow and Wednesday is a strong reversal zone for crude so I am going to take profits in my long crude oil position today. Selling my long position in crude oil.