The Dow Monthly Chart ($INDU) posts a Key Reversal for May

When I study charts I frequently ask myself which type of position, long or short, would I be more uncomfortable with and after looking at the DJIA monthly chart after the close today and would have to say I’d definitely be more uncomfortable holding a long position. I really don’t like going against a key reversal (KR) in either direction, but particularly a KR which in which a which an index or stock reverses course after a prolonged move in one direction, which what we have here.

Weekly Gold (GLD) chart with Ichimoku Clouds

I have recently started maintaining some charts with Ichimoku Clouds. Here is the Weekly GLD chart.
Of course, GLD has had quite a long run up over the last five years and only in recent months has the upward momentum run out steam. I can’t stay I would want to go long until GLD breaks back above the “clouds”.

Multiple Indexes reflect Weekly Key Reversals

Upon review of numerous Weekly Charts this weekend I came across quite a few charts (both indexes and individual stocks) that reflect key reversals and look like they are breakdown. The markets appear ready to open significantly lower in the wake of election results from France and Greece, which are having a very negative impact on the Euro.

Here are a few of the charts which reflect Key Reversals:

The DJIA

The S&P 100

The Russell 2000

The German DAX

Now SBUX posts a Key Reversal Day

Starbucks (SBUX) had a key reversal today. Here is another high flyer that is overdue for a correction so it would not be at surprising if this is the beginning of a substantial sell-off. With today’s price action the foundation has been laid for Key Reversal on the Weekly Chart as well.

Apple’s (AAPL) Weekly Chart reflects a Key Reversal

Now things are going to get very interesting for Apple. Has this key bellwether stock finally run out steam, at least for short term? Picking a top for a stock ( or index or commodity) that has very strong upward momentum can be extremely hazardous, as all experienced market technicians know, but they frequently happen in the trading immediately subsequent to a key reversal and that is what we had this week on the AAPL weekly chart. The definition of a key reversal varies in some circles, but the basic type, which requires a higher high and lower close than the previous session, is what we saw this past week. I think Apple will probably experience it’s first real correction of the year within the next few weeks. I remain bullish on Apple long-term, but a correction is long overdue.

The Russell 2000 Index (RUT) gaps down.

Now here is a chart that looks quite bearish. The gap down was small, but it was indeed a gap and that usually leads to lower levels in subsequent trading sessions. I expect that we will see Russell 2000 quite a bit lower over the course of the next weeks. (Unless BB kicks in the QE3!!!)

More signs that a correction is at hand…

There are all sorts of technical indicators that have turned bearish bearish within the last week. The market appears to be ready to retrace a significant portion of the vapor rally of the past 4 months. Here are a few of the charts that should encourage the bears and give the bulls reason for concern…Although the standard caveat remains in effect, namely, Fed intervention can render everything else meaningless, so if QE3 is announced out of blue to the market will go up. That said, don’t think we will see QE3 until the market has experienced at least a 10% correction and it more likely to occur toward the end June, when Op Twist is scheduled to end, JMHO.

There was a key reversal last week on the DJIA weekly chart (outside week, with a lower close), the weekly MACD is very close to taking out the signal line to the downside and the weekly stochastics have rolled over.

The Weekly Advance Decline line is rolling over….

The VIX is still very low and at a level which often signal that a sell off is likely to occur….