Definite indecision today! It’s not unusual to see a day of consolidation following a big day of trading. However, the indecision is also occurring right at obvious resistance levels for each of the indexes. Although Yesterday’s Bullish trading reduced the prospects of a market selloff, today’s trading is not producing confirmation that a Bullish Trend is about ready to start. Monday will be an important day to see whether the resistance levels are going to continue to act as resistance or whether bullish sentiment can push up through those levels. Do not expect too much movement Today in the overall market, which still makes each individual stock chart the primary criteria. This is why we recommend Trend Analysis.
The indecisive nature of the market trend has been illustrated with the Dow and S&P 500 not able to get back up above the T-line. At the same time, the NASDAQ and the transportation index have traded above the T-line for the last few days. The T-line is a very important confirming factor, until we see all the indexes trading above the T-line, there will not be any decisive trend movement. Today’s positive trading is breaking the Dow and the S&P above the T-line. But like Yesterday’s trading that had started off with the indexes trading positive, that strength needs to be witnessed going into the close today. This would not signal a major reversal. There are still visible resistance levels in the major indexes that need to be breached to illustrate there is a new strength in investor sentiment.
The markets remain in an indecisive trading mode. The NASDAQ is showing a good strong Bullish Chart, as well as the transportation index. The transportation index is currently forming a trend kicker signal. If it closes above the T-line today, the prospects of a Scoop Pattern set up is highly probable, indicating more upside. The Dow is the weakest of the indexes but it is having a drag put on it by the much lower trading of IBM. Obviously the long positions are working well today but do not abandon any short positions in the portfolio that has not illustrated a confirmed reversal signal. The trading prognosis remains the same, have both long and short positions in the portfolio.
A learning experience – the positive trading yesterday in the market indexes did not create reversal signals, merely an up day. Because it was not a reversal signal, it can be assumed there was not any major change of investor sentiment. Today’s lower trading confirms. Nothing has changed in the current trend/nature of the market. It continues to move in a sideways mode, making each individual chart the predominant analytical factor. Long positions should not be showing sell signals/weakness, short positions should not be showing bullish candlestick signals. The patterns continue to work as the most effective profitable trade results. This is why we recommend being strong in trend analysis.
Currently the market indexes are creating Bullish Harami signals at the same levels the indexes bottomed out 3 to 4 weeks ago. However, the optimal word is currently. To create Bullish Harami signals today, the indexes need to close near the high end of their trading range. A close back near or below today’s open and most of the indexes would indicate the current downtrend was still in progress. Until the market indexes can show enough strength to close backup above the T-line, the downtrend has to be considered to be still in effect. Keep both long and short positions in the portfolio.
The NASDAQ is showing strength at the 50 day moving average. However, the Dow and S&P 500, currently trading slightly positive, still are trading below the T-line. This has to be viewed with the probability that the slow downtrend is still likely to be in progress. Support at the 50 day moving average, starting another uptrend, definitely requires a bullish reversal signal and a close above the T-line. Until then, let the short positions continue their downward trend until there is a definite reversal signal. This is why we recommend Trend Analysis.
The indexes have been trading below the T-line for the past 4 to 5 trading days. But each day has been a very indecisive trading day, Doji’s. The sideways motion of the market would be obvious when analyzing any chart, however a candlestick chart provides additional evidence that the sideways motion of the market is including indecisive trading days. This clearly reveals there is no conviction from either the Bulls or the Bears. What should this be telling us? To be prepared for a dramatic move, usually indicated by a gap one way or the other. Although the market direction is not doing anything, be ready.
If the markets close near the low end of their trading range, it will reveal that the indecisive trading over the past two weeks at the T-line was acting as a resistance level. The 50 day moving average has been acting as support. But if the Dow closes below the 50 day moving average, a downtrending channel will remain in progress. The NASDAQ is currently trading below the T-line and at the 50 day moving average. The indecisiveness/weakness of the markets are being blamed upon the lack of scheduling for tax cuts. Many long positions are showing a lack of bullish conviction whereas the short recommendations continue to move lower with more enthusiasm.
Today’s positive trading in the Dow is clearly reflective of the support at the 50 day moving average. The NASDAQ is still demonstrating reasonable strength, moving somewhat sideways over the past few weeks but still showing bullish signs as the trend stays within reasonable range of the recent highs. Note that today’s trading has been a very slow and consistent move to the upside, continuing to reveal there is no exuberance yet experienced in this steady uptrend. A good strategy remains having predominantly long positions in the portfolio with a few short positions.
The markets are absolutely flat. What does this tell us about investor sentiment? Usually absolutely nothing, no bullish force or bearish force. However, the lack of selling today does have some significant information. A missile launch in Syria, a terrorist attack in Sweden, much lower job numbers than expected, and this information is not creating any selling in the market. The lack of selling on potentially bad news is taking into account the overall bullish confidence that is building up in the American economy. The bullish charts are still working, the bearish charts are still working. This is why it’s important to project price targets.