The markets are showing a lack of resiliency on the sell side today. Although they are trading lower, the candlestick signal on the NASDAQ is showing buying after the open. The Dow is using the 3-T line as support. Keep the analysis simple, the uptrend remains in progress as long as there is not a sale signal and a close below the T-Line.
Note that the Dow and the S&P 500 have gapped up in the overbought condition to trade above the 200 day moving average. The gap up in today’s trading should be an alert. The uptrend requires today’s indexes to continue to trade near the high-end of their trading range. A pullback towards today’s open would create the possibility of a gapped up shooting star at a major resistance level. Be prepared to take profits if the markets start selling off before the end of the day.
The T-line continues to act as a predominant trend indicator. Yesterday’s trading in the Dow and S&P 500 brought the indexes back to the T-line. A lower open today would have breached the T-line, making a continued pullback very likely. However, as seen, today’s positive trading continues to make the 200 day moving average the viable target. Until there is an actual close below the T-line, the uptrend remains in progress.
Today’s trading is demonstrating another indecisive trading day, the Dow and the S&P 500 currently forming Doji’s, the NASDAQ pulling back almost to the T-line and the transportation index trading positive. Although this does not show any change of the current trend, the fact that the Dow and the S&P 500 have formed a series of doji’s in the overbought condition should be an alert. Stay predominately long but be ready to take some profits if any weakness starts appearing in the markets.
Today’s backing and filling does not illustrate any change of investor sentiment. The Dow had been trading positive while the NASDAQ was trading lower, indicating there was no major change of the current trend. Currently, the Dow and the S&P 500 are trading slightly lower but with the Doji formations, indicating the lack of decisive selling. As long as the indexes continue to trade above the T-line, the uptrend has to be assumed to be in progress.
A simple rule of market trend analysis is utilizing what each market index is doing as a total analysis. Today, the Dow and S&P 500 is trading lower but the NASDAQ is trading higher. This combination infers that the current market trend has not changed, there is no consensus of the indexes. As long as the indexes remain above the T line, expect the 200 day moving average to be the next likely target.
Today’s positive trading is showing the indexes currently supporting on the T-line. This continues the uptrend, provided the bullish sentiment can continue going into the end of the day. A failure to stay above the T-line today would still make the 50 day moving average a viable target, indicating a few more days of pullback. Have both long and short positions in the portfolio.
Although the markets open lower today, the indexes are now trading back up toward the top of their trading range and the NASDAQ is now trading positive. The expected profit-taking from yesterday’s Doji’s may have already occurred. However, continue to be on the defensive, weaker trading before the end of the day would still reveal a pullback to see if the moving averages they had acted as possible resistance are now going to act as support.
Warning, warning, Will Robinson! The indecisive trading in the indexes in the overbought condition, the Dow and the S&P 500 trading absolutely flat, creating Doji’s is indicating a possible change of the market trend. A logical pullback would be back to the T-line or 50 day moving average. The NASDAQ is showing potential weakness at the 50 day moving average and the downtrend of the past three months. The transportation index also showing some consolidation at the downtrending resistance level. These market conditions warrant closing out long positions that are starting to confirm sell signals and adding a few short positions to the portfolio.