Watch two more videos below on technical setups, including individual stocks and ETFs.

The posted information is for educational purposes only and not a recommendation to buy or sell any stock or ETF.

tactical review of technical setups 5-19
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5/20 Commentary: The rising trendline on the DJIA broke down today, as it plunged 200 points dropping 1.53 %. Yesterday the Dow formed a inverted hammer on its daily chart, which received confirmation today. Today's breakdown caused my to take an active role in on the short side. I believe that both the Dow and S&P 500 have formed rising wedges that contain small double top patterns within them. The Dow's pattern measures approximately 386 points with an objective target of near the 12,300 area. The confirmation line for the double top pattern on the DJIA is approximately at the 12, 740 area. I believe that the Dow is the first to crack its trendline and the other averages will follow suit. The VIX jumped up 29 % today and I think it will break out of its falling wedge as it as found support near 16.

The S&P 500, SPY and the Qs have multiple points of negative divergence on the histogram and got bearish crossovers on their MACDs with today's sell off. The rising trendline on the S&P 500 did hold up but given the weakness on the intraday charts and negative signals on the indicators in on the daily charts, I believe the averages are now breaking down. The intraday low today was 1409, which is right at the current rising trend. It looks like wave B is beginning and with massive overhead resistance its time to play the short side. I am playing the ultrashorts and I took positions in the bullish falling wedges on SDS and QID, and bought the breakout of DXD today (first three charts below). Incidently the S&P 500 got a dangerous doji yesterday that could be setting up its double top pattern. The pattern measures to the 1341 area. So it appears that yesterday's sell off was likely a blow off top on most of the averages.

The Qs broke down from another rising wedge on its 60-min chart and could test support on the lower part of the rising trend channel near 47.50. However the last minor low did hold up at 49.

The two key levels of support are 49 and 48, if violated prices will test the rising trendline at 47.50. Should that fail the Qs may go back and fill the gap at 45.50, which is visible on the 60 minute chart.

I believe that the 'sell in May' mentality has begun with today's sell off, and I believe that we are now carving out wave B on the inidices. This should allow the obsession recession crowd to regroup and concoct more propaganda to scare the masses. I fully expect that the drum beat of recession and a bear market, will be pounded out by the bears once again. As they sound the alarm that the world is on the brink of a global catastrophe. How be it, many of the economists that previously forecasted a recession, are now jumping off the recession band wagon. They are intelligent enough to see that the writing is on the wall.

Yesterday the New York-based Conference Board announced that the index of leading U.S. economic indicators rose in April for a second month. The Conference Board's gauge increased 0.1 percent, which was better than forecasted, and matching the 0.1 percent the increase in March. Economists had forecasted a decline of 0.1 percent. This gauge uses 10 economic components to take the temperature of the economy. These readings reveal that the prospects of economic grow over the next 6 to 9 months are excellent, and it implies that the economy is getting stronger not weaker. Ken Goldstein, who is a labor economist at The Conference Board said on Monday, 'this data certainly reflects a weak economy but not one in recession.' The economy is expected to grow this year at 1.2 percent, compared to the 2.2 percent growth in 2007. Goldstein further stated, `the small increases in the leading index in both March and again in April could be a signal that the economy may not weaken further.' Even Treasury Secretary Henry Paulson has publically stated that he believes that the worst days of the credit crisis are behind us.

Last week we were informed that the Reuters/University of Michigan sentiment index fell to a 26 year low in April at 59.5. Consumers that were surveyed, 'viewed the economy to be in a recession,' with 'no hope of recovery anytime soon.' Additionally, 9 out 10 survey respondents believe that the economy is currently in a recession. This survey is very telling. Because it is not based on economic facts, but rather based on human emotions. And as we all know, emotions can be deceiving. Acclaimed physiologist Dr. James Dobson wrote a book about human emotions which he entitled, Emotions: Can You Trust Them? And the answer is unequivocally no, emotions can be deceptive. I look at this report as a lagging indicator, that strongly suggests capitulation has occurred. Dr. Alexander Elder, who is a psychiatrist, goes in depth in his book, Trading For A Living on crowd psychology. Elder found that most of the time the crowd gets it wrong, because their 'consensus changes from moment to moment.' It is ironic that the sentiment index reading was very negative, but yet a better than expected April leading indicators reading ( The Conference Board's gauge discussed in the previous paragraph) reveals that the opposite is true. Thus, the best way to approach this survey is utilizing it a contrarian indicator. Growing pessimism is good for the stock market, because it is always darkest before the dawn.

Even though we have some economic challenges, it appears that the US is rising to the occasion. With crude oil approaching 130 dollars a barrel, there will be a lot of talk about inflation once again. Furthermore, there will be speculation of the Fed having to aggressively raise short term interest rates in order to curb inflation. Even if the pauses on cutting rates, we can be assured that the weak housing market will keep them from tightening any time soon. So we can breath a collective sigh of relief.