Top40 end of the week chart

First trading week of 2011 was an exciting one: First two days were up days with small range. Market made 52 weeks high on Tuesday at 28947. On Wednesday bears came out and pushed market lower - some 420 points on close. Thursday was again slow green day, which leaves us with Friday when bears were in control again.

Currently Top40 is trading below 10 and 20 exponential moving averages and that can be a warning signal. If you are trader who wants to catch swings lasting for a couple of days, you should be short already. Next line of defence for bulls is 50 exponential moving average that is around 27950, as well as trend line which is around 28100.

Major indicators are pointing towards more downside. Stochastic is at 45, MACD is around 200 and RSI is at 51. All recorded negative divergences from peak on November 15th and one on Tuesday.

Is this change of the trend?

I don’t think so. Market is so close to all time high that it will probably get there. This must be normal correction where market will get rid of access fat (overbought) that was accumulated over holidays. If you are looking to go long or add to long position, this will be good chance, but don’t rush into it and wait for a bit more downside.

Trade with trend!