Firstly BHP has recently hit a key resistance level.
Next the XSO. It is showing quite a lot of relative weakness when compared to the XJO or XAO.
On the XJO above there are a couple of other important points to note:
1. The rally over the last couple of days has meant that the index declined for 6 trading days and then hit a new high in less than half the time taken for the decline. This is usually a very bullish sign but it can also show up as an exhaustion to finish a move.
2. A reversal here will print a rather clear momentum divergence.
3. A reversal here (or just about anywhere actually) will print a very large divergence on the McClellan Summation Index (not shown).
4. The index is sitting in the region of former tops over the past six months. Reversals are usually better bets than breakouts.
So.... Most of the evidence at the moment points to some future downside however that fast move up this week may well be a sign that the obvious expectation is actually wrong.
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