Observe the obvious, which candlestick charts allow you to do with much more clarity. The indexes moved back up to the top of the trend channel and yesterday’s bearish Harami indicated there was not enough bullish sentiment to push through the upper resistance level. Today’s lower trading confirms the Harami, making the trend channel analysis still the predominant prognosis.
Today’s selling is the expected profit-taking after yesterday’s big day. The important level is now the upper resistance level of the trend channel in the indexes. A breakout through that level would put the markets in wave three, a strong uptrend. But until that occurs, the sideways trend channel is still the predominant analysis.
Yesterday’s trading, although trading lower most of the day, had one important factor, the indexes all close back up above the T line. Today’s positive trading reveals a double doji pattern, implying more upside. This continues the prospects of the indexes breaking out of the top of the trend channel, starting the next wave. Stay predominately long but the breakout through the top resistance level is the main criteria for continuing an uptrend.
Yesterday the indexes closed at the T-line area. Today’s positive trading makes the 50 and 200 day moving averages the next viable target. This implies some steady buying for the next day or so. Market conditions have not changed, there are both good long positions and short positions working. Oil prices had been showing Doji days in the oversold area. Today’s bullish trading indicates which direction they’re currently taking crude oil prices.
Today’s positive trading in the markets appear to be confirming the bullish Harami’s of yesterday.”Appear” is the important word, currently there is no great buying pressure after the markets have opened positive. This is still indicative of the nature of the current trend, slow, sideways, indecisive. Continue to analyze each chart as the primary analytical factor.
Today’s positive trading in the indexes demonstrate the sideways channel remains in progress. The bias remains to the downside as long as the indexes are trading below the T line. However, the lower channel support area remains a strong trend indicator. Bullish trading should be viewed with some suspicion until there is a confirmed candlestick buy signal in the indexes. Portfolios should be oriented more to the downside.
Although the sideways trading pattern continues in the indexes, strong bullish patterns continue. All recommendation again on PACB and OZM is based upon a frypan bottom breakout, AVXL a T line crunch and the uptrend in SEDG continues by simply using the halfway point of Wednesdays candle as a stop. The Dow is currently trading at the lower edge of the wedge formation. It will be important to see if this area acts as support. Continue to have both long and short positions in the portfolio.
The indexes of all pullback to the T-line today. It would now be important to see whether the T-line acts as support from here. This is expected profit-taking after the buying going into the Fed meeting. The T-line will be an important factor for analyzing whether this is merely profit-taking or now that the rate hike has been implemented, is investor sentiment now looking to what the next economic factors will be. A close near the lower end of today’s trading range will continue to put the sideways mode of the market in place versus a potential breakout of the upper resistance level.
Today’s strength reveals a high probability of a market reversal after yesterday’s bullish Harami’s/hammer signals in the indexes. Additionally, the reversal signals occurred right at the same level the markets formed a bottom about a month ago. It now becomes important to see what the indexes would do at the T line area. Be prepared to shift the portfolio bias from predominately short to predominately long based upon strength going through the T line. Keep in mind, the T line is an important factor for acting as support and resistance.