From a classical technical analysis point of view, the index is still in a downtrend, due to the pattern of lower highs and lower lows. As such, the odds of achieving success through buying US stocks are lower now than earlier this year, when the Dow was in a full blown bull market.
As I mentioned last week, though, the long term trend remains up, so shorting American stocks is completely out of the question for me.
The bottom line for US stocks is that I am neutral.
Meanwhile, pretty much every other market that I look at appears much worse than the Dow. For example, take this daily chart of the Brazil iShares:
Unlike American stocks, both the long term and the short term trend are both down, so this ETF may be sold short according to my system.
Possibly due to weakening commodities, the Chile iShares are also on a short signal:
Never in my trading career have I seen international markets diverge so drastically from US markets. My plan for next week is to continue shorting emerging markets through my holding EUM and I will be buying 2 US stocks from the strongest sectors on Monday.
Buying the strongest stocks in the strongest sectors in the strongest market while selling short the weakest, most vulnerable sectors gives me not only an edge, but also helps keep me diversified.
