"The DJIA looks like it may fail to make a new high and start to fall through the day. If this happens, it could make the start of a more significant downtrend in the US indices starting. I have increased my shorts on Dow and S&P at 29,200 and 3,300. I continue to use the same strategy of stops a bit above the high to prevent from risks of breakouts.
If this is to be the start of a bigger move in indices there are themes we should see in the falls. There should be a lot of downside momentum. Rather than drifting lower the market should move in faster bursts when breaking lows. Corrective patterns in short term price action should lean more toward ranging sort of patterns. Any moves up will probably be fast moves that are short lived. The day would also probably close under the week's open. Giving us a close to the week. If we see a larger fall and there being candles on the weekly close, this would be a more serious indicator. "
The Dow filled all of this criteria. It traded up to the levels where I increased my shorts. Failed to make a new high. Has strong waves of selling. There few moves to occur after this started were fast moves up, but short lived. None of the moves upwards sustained for over 30 minutes. With bears taking new price lower after each small bounce. The week closed as a bear. It was not a big enough sell off to form an obvious candle. Instead we've formed an candle formation. These can often show we are at inflection points and the market is close to making a decision on direction.
Fake sell offs are aplenty in the indices, so seeing this initial weakness is not a sure fire sign more selling will start just yet, and I'd consider spikes a bit higher than current highs to be a significant danger to early shorts. Selling with stops above current highs makes us fair game to stop hunting, even if we are right in the general forecasts. An more important break would be made at 28,500. Seeing the market trading under there will lead me to sell more with tighter stop losses since there will be a lot more chance of there being stronger momentum behind this breakout lower.
Again I'm looking for the same sort of characteristics in the selling if it does occur. Strong selling as opposed to slowly drifting lower. When there are bull moves they are quick and equally quickly overcome. The market will be more inclined to range than travel upwards when meeting support levels. One of the most significant things I will be looking for is there being a lack of buyer enthusiasm on the 28,500 level - indicated either by an easy bear break of this level or a unconvincing ranging pattern (shown in my previous forecast) on this level. Upon seeing this, I will be selling with my first main swing targets at 22,900. If this breaks, we probably have very big bears in the market - I will continue to sell more.