The Dow is trading down 25 points while the NASDAQ is trading positive three points. This is the obvious consolidation after the strong move the market has made over the past few days. Continue to stay long until you see a candlestick reversal signal. There is the potential of a possible pullback to the T-line/50 day moving average area but with the strength of the candlestick reversal signals of the past week and a half, the probabilities would indicate the uptrend will be continuing. It may have a few days of moving sideways, allowing the T-line to catch up. Stay predominantly long.
The candlestick reversal signals of the past few days are now being well confirmed. The NASDAQ as gapped up again after buy signals, indicating more upside potential. The buy signal in the Dow closed at the 50 day moving average yesterday. Today’s positive trading is taking the Dow up above the 50 day moving average and breaching the downtrend channel. There is now a good probability the indexes will come back up to the trajectory of the uptrend that was in progress prior to the pullback starting in mid April. Stay predominantly long.
Today’s positive trading after yesterday’s Doji in the indexes is the confirmation needed to indicate a major change of investor sentiment. All the indexes are currently trading above the T line. The Dow is currently nudging the 50 day moving average but the NASDAQ and S&P 500 have gone right through the 50 day moving average. The uptrend is in progress provided the markets do not close back near the low end of their trading range today.
Today’s bullish trading is significant, it is bringing the NASDAQ and transportation index backup above the T-line. The S&P 500 is trading right at the T-line, but the Dow is still trading below the T-line. This implies a possible reversal of the downtrend, however the final criteria is the close above the T-line. It will be important to see how the indexes close going into the end of the day. Keep in mind, a downtrend usually experiences buying in the morning followed by selling later in the day. Any long positions established today need to be watched.
Today’s positive trading in the markets is not yet showing anything that is changing the slow downward direction of the market trend. The Dow S&P 500 are trading below the T line. The NASDAQ is currently just nudging the T-line. The transportation index is showing the most strength, indicating the market trend is more likely to be in a slow downward drift versus a hard selling. State law in a strong sectors, oil, gold, and the Biotech’s. The retail area can be shorted.
The expected consolidation is just that, although the Dow, S&P 500, and the NASDAQ are showing profit-taking after yesterday’s big price move, the transportation index is up extremely strong. This indicates there is not any consensus selling in this market, merely profit-taking. However, it will be important to see the indexes staying near the T-line area today. There are both long and short positions working well in this market.
Although the markets are trading positive today, keep in mind that the downtrend remains in progress until there is a candlestick reversal signal and a close above the T–line. However, crude oil and gold are showing good strength. Both of those sectors are showing strong stock candidates.
The indecisive nature of the market trend persists, which is not unexpected for Friday trading. However, the strong sectors continue to remain strong, gold stocks are acting well today. And the weak sectors, retail, continue to be weak. Have both long and short positions in the portfolio.
The lack of buying/selling in the market today indicates the indecisive nature of the market, which means the Dow and the S&P 500 will probably move sideways until the 50 day moving average catches up. A wedge type formation is being created in the indexes. These market conditions still warrant having both long and short positions in the portfolio.
Profit-taking/consolidation would be expected today after the big move in the indexes yesterday. Watch to see if the T-line will act as support today. If the indexes trade at or near the T-line, which is where the Dow is currently trading, use your 10 min. chart to see if any buying comes in, indicating the T-line is acting as support. The uptrend now is assumed to be in progress as long as the indexes remain above the T-line.