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Weakening Wednesday – Running into Walls of Worry

Posted on the 05 February 2014 by Phil's Stock World @philstockworld

Weakening Wednesday – Running into Walls of WorryIt's been a long time since we've needed the Multi-Chart as the Multi-Chart is most useful when you are trying to put into context how far your market has fallend compared to other G8s.  As you can see, the Vomiting Cobra pattern is consistent across the World and has not ended well in China, where we've fully reversed 6 months' worth of gains already.  

The Dow is back where it was 6 months ago, just off the lows of Sept and Oct but our other major indexs have substantial room left to fall to catch up to Asia and our own senior index.  The UK is in the same nasty shape as the Dow and we just got bad news on German PMI, French PMI AND EU Retail Sales.  

Now we need to see the Dow get back over that 200 dma (15,475) and, if that begins to look like overhead resistance, we need to grab some more shorts.  That's another reason we like our Multi-Chart – it shows us who the lagging index is on the way down and they, then, become our favorite to short!  

We already use TZA (Russell Ultra-Short) as a hedge for our Member Portfolios and now it's the Nasdaq that has plenty of room to tumble if things really hit the fan.  Since we are going to be upping our AAPL longs anyway, we have a doubly good reason to short the Nas, which went from 3,000 to 4,250 last year (41.6%) so we'll call 4,200 a proper 40% move and that, according to our 5% Rule™, means they owe us a 20% retracement (of the run-up), which would be 240 points to 3,960, which is another 70 points below yesterday's close.  

As you can see from Dave Fry's NDX chart, the MACD is still stretched, to say the least and the RSI already spells DOOM!!! and it's quite a long way down to the next proper support, 50 points lower at 3,420.  NDX at 3,470 is 86% of the Composite's 4,031 and .84 x 70 just so happens to be…

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