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Decision Time

Decision Time

Last week, I mentioned that…

So Many Positive Divergences

First of all, it is important to notice we had once again a reversal day (hammer) in the United States yesterday. See our Sigma Whole market index (aggregate of 16 US indexes) below.

Any move above 1410 on our Sigma Whole Market Index (horizontal blue line) should be consider as an exit signal for short positions.

Sigma Whole Market Index

At the same time, the forex brook a one month downtrend, and it is now testing the 23.6% retracement level. As we had a perfect correlation between forex and equity markets in recent weeks, we must keep an eye on this market.

It is also important to notice we have an important divergence between price and RSI: downtrend in price BUT uptrend in RSI (blue line and purple line on RSI).

RSI

Looking at our Sigma Trend Index (STI), we can also notice a positive divergence between our Sigma Market Index (blue line) and the STI (red line). It is a warning signal for the bear trend:

Sigma Trading Oscillator

Looking at our Breadth Index, we can also notice a positive divergence: higher low on the breadth while lower low in price:

Market Breadth

Looking at the Sigma Short Term Sentiment, we can also notice this positive divergence:

Sigma Short Term Sentiment

Conclusion:

The downtrend is weakening and looks in danger. (a short term bottom could already be in place)

We move our take profit on our short position from 1302 to 1292 (stop buy order).

Current position: 1/2 short @ 1334.07

Have a nice day,

 

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