2 More Major Indices Issue Sell Signals

Stocks opened higher yesterday, but troubling headlines from Europe's
financial centers and uncertainty in Asia following the death of North Korea's
leader resulted in lower prices. Banks were the hardest hit, down 2.3%, led by
Bank of America (NYSE: BAC ), which hit a new low for the year, losing 4.1%. The
Dow Jones Industrial Average fell 0.84%, the S&P 500 lost 1.17%, and the Nasdaq
fell 1.26%. Volume was light with just 774 million shares trading on the NYSE
and 419 million on the Nasdaq. Decliners outpaced advancers by 4-to-1 on both
exchanges. Click to Enlarge Yesterday's break by the Dow Jones Industrial
Average through its 50-day moving average at 11,824 (blue line) confirms the
break of its 200-day moving average (red line) and shifts the momentum to the
bears. The only remaining barrier needed to confirm a double-top is the support
line at 11,650. A break of that barrier would give a downside target of around
11,000, which is well within the support zone of 10,800 to 11,650. Note that
last week's MACD sell signal is confirmed by a continuation lower of its red
fast line. Click to Enlarge The Dow Jones Transportation Average has thus far
held better than any of the major indices. That is until yesterday when the
index finally closed under its 50-day moving average (blue line) at 4,815. But
like the industrials, it too has a support line (4,685) that must be penetrated
before the double-top is confirmed. And its MACD sell signal is also confirmed
by a continuation of its red fast line. Conclusion: Until yesterday, the two
major Dow indices, the industrials and the transports, were exhibiting more
resistance to the bear's growl than either the S&P 500 or Nasdaq, both of
which have broken down. And now all of our internal indicators have flashed sell
signals. In addition, last week the AAII sentiment survey reported that the
bullish reading rose for the third consecutive week to 40.19% from 33.04%, while
its bearish reading has dropped for three consecutive weeks and is now at
33.64%, from 39.42%. This inverse indicator is warning that lower stock prices
are likely. Continue to pursue bearish strategies. (For fast profits, check out
my colleague John Jagerson , who turned a 67% profit overnight.) Todays Trading
Landscape To see a list of the companies reporting earnings today, click here .
For a list of this weeks economic reports due out, click here .