The market takes a pause

Today was the third disappointing day in a row in the Dow, losing another 60 points. I've zoomed in on the recent daily action so we can take a close look at it. From a classical candlestick point of view, this chart looks bad (see the last three candles): a doji, followed by a hanging man, and then a confirming red candle. Along with an overbought stochastic and RSI, both of which have peaked, this makes for a bearish call.

However, note that despite the recent losses, we remain inside the RTC channel. It would take three more days at the current level (11,347) or one more day of declines like today's, to bring us into a bearish setup. Note also that although selling volume was higher today than yesterday, both days were below the levels on the previous two up days indicating a certain lack of enthusiasm for selling. Also, the sentiment on finviz.com is 58% bearish which, if we adopt a contrarian stance, is bullish. Also, today's close brings us pretty much to the 50% Fibonacci retracement level of last Thursday's big gain, implying a natural stopping point.

So all in all, I'm going to have to stick to my system and say that the uptrend remains intact, although I'm not expecting a major rally tomorrow.

Storm clouds on the horizon
Although I usually try to stick to purely technical analysis, the following news item that just came out caught my eye, courtesy of marketwatch.com:

SYDNEY (MarketWatch) — China’s credit-rating agency on Tuesday downgraded its rating for U.S. sovereign debt and warned of further cuts, in a pointed move ahead of this week’s Group of 20 major economies meeting.

You can read the whole article here. I don't know about you, but I find this more than a little worrisome for the future. In the meantime, since I can't set US monetary policy, I continue to watch the charts and try to make some money.

Trades

No trades today. I spent some time going over my watch lists but was unable to find anything that looked like a compelling buy, despite today's down market. And, although I was down a bit today, I also couldn't find any compelling reasons to sell anything either. Not just yet anyway. Again, I must remind myself to exercise patience. Let the market come to you, never the other way around. In the meantime, I was pleased to see that LOW was down another 44 cents after I dumped it yesterday.