Just past midday here on Friday, and I'm seeing negative divergences cropping up on the major U.S. market indices. When looking at shorter time frames, I often switch from RSI 14 to RSI 7 as I've done in the charts below. This is by no means an indicator that works all the time, but it works enough to give it some attention.
All of the major indices are showing signs that a potential short term top is in place. I'm not expecting a huge drop from here, just some backing and filling to work off some of the excess of the huge gap up after the temporary resolution from Congress to the fiscal cliff.
What's also interesting is the strength in the U.S. dollar, and continued weakness in both gold and silver. Erik Swarts, on Twitter [@MktAnthropology] has posted some charts on his website where he compares the recent action of the dollar to what occurred back in 1996 when the dollar began a move that lasted well into 1997. The similarities are remarkable.
This is probably a good time to begin trimming long positions and raise cash levels.
All of the major indices are showing signs that a potential short term top is in place. I'm not expecting a huge drop from here, just some backing and filling to work off some of the excess of the huge gap up after the temporary resolution from Congress to the fiscal cliff.
What's also interesting is the strength in the U.S. dollar, and continued weakness in both gold and silver. Erik Swarts, on Twitter [@MktAnthropology] has posted some charts on his website where he compares the recent action of the dollar to what occurred back in 1996 when the dollar began a move that lasted well into 1997. The similarities are remarkable.
This is probably a good time to begin trimming long positions and raise cash levels.
