This is not a prediction it is just a list of things to look for as possible signs before a market rolls over. Alone these are just possibilities but the probabilities increase as more of the signs are in place.
- When the RSI gets near 70 on the daily chart for a stock index ETF, the price momentum slows, and the the price settles into a trading range.
- A shooting star Doji candlestick.
- If the market opens higher but fails to go over the opening price level for the entire trading day, this is a sign that buyers are rejecting higher prices.
- The market opens below the previous days trading range and never gets over the previous days low, that is an early sign of a new trading range.
- The market starts to open higher but closes lower, that is a sign of distribution.
- The average daily trading range increases and volatility starts to grow.
- A huge volume day that gaps way up and then sells off into negative territory on high volume.
- An index is far extended from all major moving averages.
- A major “good news” event is passed with little up movement, and the market is out of catalysts.
- When the majority is against you short selling the market.
These are just things to look for going forward and could result in nothing more than a pullback to a short term moving average or a new range being traded. There are times to buy a breakout and times to wait for a pullback. There is a fine line between chasing the market higher and buying momentum.