US Equities remain under pressure.

For some reason yesterday's post seems to have disappeared.So I apologise if you think you  have seen something similar before.

I am attaching a couple of charts from Excel, the first one is the daily close 2000 - 2011. The second chart is an indicator I follow for a system. It is the 14 day RSI of the 50 day SMA (Yep a derivative of a derivative).

I want to draw your attention to something occurring on these, which is reminiscent to three prior occurances over the past 10 years. These are highlighted by the round yellow circles, it is a divergence between the indicator and the price at extremes. In all three cases a decent correction ensued in the subsequent weeks.

I am of course aware that three occurrence do not mean a fourth will happen, however I think it is something to be aware of, particularly when considered together with some weekly signals on the SP500 (See chart below). This chart shows a strong bearish candle last week 'Dark Cloud Cover', a close relative of the engulfing candle, together with clear divergence on momentum.

What makes this interesting is that the charts for the prior occasions displayed strong similarities (See below), that is a strong reversal candle pattern on the weekly, and clear momentum divergence.

SP500 WEEKLY 2002

 

 

SP500 WEEKLY EARLY 2005

SP500 WEEKLY LATE 2005

As the week closes, it looks as though we are heading into a weak close, after a few attempts to regain some poise have failed. - The key support area on the chart is around 1328. If it can hold this area, then the chance of further highs remain, or at worst continued sideways action, however a sustained break of this area, could see several weeks of correction at least possibly back to or below March's levels.