Well what do you now, Adam discovered a bearish engulfing pattern on the DOW on the monthly charts. However, if we drop to about 10,000, it would be an evening star pattern, and that would be a clear indication of a reversal. Adam also shows where he thinks the monthly trade triangle would go red which would also be quite bearish, at around 9600. Take a moment and watch the video below

Two things that I want to call out in addition to what Adam showed you in the video.

1. Notice on the monthly chart, the DMI+ has never crossed above the DMI- on the ADX. The prevailing long term downtrend is still negative, although eroding on this indicator.

2. Notice the MACD (12/26/9) also never crossed above 0 during this rally (on the monthly chart). Again, momentum never got strong enough to take out the downtrend in this market.

I’d watch this months candlestick pattern quite closely. If an evening star pattern forms, this is a definite reversal, and it’s time to get short!

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