The domestic stock markets have been looking weaker and weaker as they head into the ultra important Black Friday and holiday shopping season. Tuesday’s weak open as the result of Turkey shooting down a Russian fighter jet is the confirmation needed to issue a sell signal in the Dow Jones Industrial Average (DJIA) futures. The Nasdaq 100, S&P 500 and DJIA are all exhibiting the same pattern but the textbook example lies in the Dow futures.
This week we’re going to look at the Dow Jones Industrial Average, the S&P 500 and the Nasdaq 100 equity futures markets. All three of these markets are setting up for a classic Commitment of Traders (COT) Sell Signal based on the disparity between the markets’ prices and the actions of the commercial traders within them.
I understand that our weekly readers may feel like we’re beating a dead horse over the last few weeks. We’ve stated and re-stated various reasons for our concerns regarding the equity markets and this week has provided yet more fuel for the warning signal. First of all, let me begin with my personal bias by stating that, as an S&P 500 pit trader whose only decade on the floor was the 1990’s, I’m used to making money on the long side. However, there are enough warning signs in the marketplace right now that I won’t take a long position home. I believe the next home run trade in these markets will be on the short side and this week, I’ll provide one more big money example.