Strategy for the week 29 Oct 2012 (US)

I am bearish in the short term for the US market.  In spite of the coming elections, QE3, and the traditional end of the year rally.

It is intriguing to note that S&P made a year high of 1474 on 14 Sept 2012, the day after Dr Ben Bernake announced QE3.  Interestingly, it has made a sequence of lower high of the daily chart.  QE3 is a sound plan to lift the market in the long term.  

What then is the reason for the slide since the announcement?  Poor earnings report.  Earnings is the heart of running of any business.

Lets analyse the S&P chart in multiple time frames.  Starting with the daily time frame (right).

1) Price has broken the triple top neckline at 1430, which is also the 78.6% fibo level.  It will very likely reach next support is at 1396 this coming week.

2) Price has broken the ralf regression channels.  This tells me that the short term trend is defintely not up.  It is either down or ranging.

3) 13SMA, MACD, Stoch, RSI are all trending lower, signalling that the momentum is down, with no sign of stopping.

Now look at the weekly chart (middle).  The is the main time frame that I use to define by strategy and tactics.

1) Notice that S&P has reached the quarterly pivot, which has a resistance turned support level.  We may see some support at the current price of 1414.

2) 13SMA, MACD, Stoch are indicating clear downward momentum.

Now, there is a support and there is a downward force, which direction should I should take?  I lean towards taking a downside bias.  Until the price action show me some tangible support, I will look to short.  This will also mean that I take quick profits, rather than the saying "let the profits run".

On the monthly timeframe, it is clear that the trend is up.  However, look at the last 2 candles on the monthly chart.  Note the month has not ended, but assumming if it did, the S&P looks like it will be retracing.  The name of the candle is a bearish harami, which means pregnant woman.  If it gives birth, I will expect S&P to retrace strongly.  The 2 candle formation also looks like a double top with relatively long wicks, signalling the bears are in control for the time being.  

RECOMMENDATION : SHORT.  INVESTORS STAY OUT.