A Look at the Daily Chart of the YM Emini Futures - 10/25/2009

We are experiencing what could be described as topping action in the major indices. As I mentioned in a tweet on Friday we have had 3 months of negative divergence on the daily chart. I wouldn't be surprised to see the Dow make a swift drop down to about 9500 from here and then one final push to new highs around the 10468 area before doing the final CIT (change in trend) and heading back towards the March 2009 lows. I have been calling for 10313 - 10625 for some time now and I still think that this area, at a minimum, will be tested before we finally roll over. This is the overall price action I see playing out in the longer term.

Keep in mind that money in trading is made not by being right in your predictions but by being on the right side of the price action. This is just what I see happening. It could or could not happen. I will not try to force my will on the market. The best traders I know don't care what the market is going to do...they just know what THEY are going to do if the market does A or if the market does B. Much better to be prepared to act on what the market does than to try to predict what it is going to do. All that being said the above is my forecast of how I see price action playing out from here.

Note: The black line on the chart is the OVERALL price direction I am anticipating. I do not think we will go straight down like the black line in the chart. Obviously price will ebb and flow, the main point is that the 10313 - 10625 price area should be touched to the upside before we have a major CIT. By major CIT I mean that once price reaches this major CIT area the march lows should be in play before any new highs.

The other area I have been keying on for a major CIT is 11250 - 11875. So, in conclusion, I will be expecting a rather fast move down to 9500 or so from here, then a move back to 10468 or so. Once we are at the 10468 area I will reassess the situation and most likely either anticipate a major CIT is in the works or be on the lookout for 11250 - 11875 as the major CIT area and then a move back towards the March 2009 lows.