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TREMENDOUS AMOUNT OF RISK IN $INDU

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An important tops looks to be in place in the Dow Industrials ($INDU) by month's end if the current pattern holds true to form. Quite simply, the $INDU is forming a bearish wedge pattern, of which rising trendline support looks to be violated in the months ahead. This probability is higher given the current bearish key monthly reversal to the downside - if it holds up through month's end, and we have no reason to believe it won't given there are only 8-trading sessions remaining. And, this reversal lower is confirmed by the bearish divergence seen in the 9-month RSI.

Dow 5-19-12

Collectively, this presumes a decline back towards the rising 40-month moving average at 10,882...or roughly -1,500 points from current levels - a not inconsiderable sum to be sure. And if this support level is violated, then the downside could be rather difficult indeed towards the 250-month moving average that was ultimately tested during the 2007-2009 bear market.

In any case, there is a tremendous amount of risk in the $INDU - and rallies of any type are to be sold, and to be sold aggressively.

Good luck and good trading,
Richard

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