The indecisive nature of the market is still being demonstrated in today’s market trading. The major indexes, trading slightly lower, are trading above where they opened or trading as Doji’s so far Today.

The markets still can’t make up their minds, illustrated by the trading above the T-line and back below the T-line, then backup above. This clearly indicates there is no major consensus by the Bulls or the Bears. Both long and short positions are still trading profitably off candlestick signals. Until there is a definite signal confirmed by a close above or below the T-line, have both long and short positions in the portfolio. Obviously, this is a very schizophrenic market to trade.

Candlestick analysis provides a high probability trading platform when utilizing the information built into each signal and pattern with confirming indicators. Friday, after a potential reversal signal in the indexes, the uptrend was in the process of confirming but for one final indicator, the T-line. After trading above the T-line most of the day, the closing levels of Friday brought the indexes back down below the T-line. This caused a major question about the uptrend, due to the T line rule. The T-line rule merely states that a downtrend has reversed based upon a candlestick buy signal and a close above the T-line. When the indexes did not close above the T line on Friday, a very simple assumption was created. The uptrend was still in question. The probabilities of the indexes closing below the T-line provides a logical strategy for the candlestick investor. Short positions should not be closed out until the final confirmation, the market indexes closing above the T-line.

The indexes forming a Doji going into the close of Friday, prepared candlestick investors to be ready to short positions on a lower open Monday. A lower open would also indicate the uptrend was not in progress, failing at the T line area. Knowing the direction of the overall market based upon how the premarket futures indicate the market will open after a candlestick signal keeps investors from entering positions that will not be confirming, such as long positions in today’s trading, and directing them to short positions that are confirming. This provides a constant common sense strategy to allow investors to enter appropriate trades and keep them from getting into trades that are not confirming.

We will conduct a “Members Only” chat session tonight at 8:00 pm EST.

Good Investing,

The Candlestick Forum Team

The failure of the indexes staying above the T-line in Friday’s trading was an indication the bullish sentiment was not strong enough yet to start an uptrend. Today’s lower trading, indicated by opening lower after Friday’s Doji’s in the indexes, made it apparent the T-line was still acting as a resistance level. Although the markets are currently trading above where they opened, the strength of the buying has not yet produced evidence a new uptrend has started. The T-line remains a very relevant factor. Continue to have both long and short positions in the portfolio.

The strong gap down today in the indexes was producing a dismal prognosis for the market trend, not dramatically bearish but definitely taking the wind of the sails of the bullish sentiment. The possibility of a waffling sideways market, indicating the lack of any decisive movement for the short term. What is required to maintain any bullish trend sentiment is for the indexes to come back up and still close backup above the T-line. Until there is strong bullish confirmation, moving the indexes well backup above the T-line, the indecisive oscillating in the markets would not be unexpected, investors trying to figure out whether the recent support levels were going to continue as support. This is a long indecisive prognosis because the markets are still in the stage of figuring out whether this is merely a bounce in a downtrend or whether a new uptrend has started.

The bullish engulfing signals formed in the indexes yesterday, at likely support levels, are confirming Today. Confirmation required bullish trading and not resisting at the T-line. AMZN formed a bullish left/right combo right at the 50 day moving average. Numerous other stocks formed bullish signals at likely support levels. Today’s evaluation requires seeing the indexes maintaining their strength into the close, closing above the T-line. The Dow, confirming the bullish Harami right at the 200 day moving average, was a good indication that was where buying decisions were being made. Adding long positions today still requires the market indexes closing above the T-line. That would produce a high probability the pullback is over.

Another tweet! Another change of investor sentiment in the markets! The 200-day moving average is acting as a strong support level for the Dow. All the indexes opened lower today but are now currently trading well above where they opened. The indexes appear to be trying to base at levels they bottomed out a month ago. Short positions should now be analyzed with the idea that this might be the area where the Bulls are stepping back in. Any long positions added at this area still require confirmation.

The positive trading so far Today are forming bullish Harami’s in all the indexes. However with stochastics not quite in the oversold area, today’s positive trading still needs to be watched with a little skepticism. Obviously a bounce was likely. The bullish Harami forming in the Dow is occurring right at the 200 day moving average area, a logical support level, but it is not unusual to see a bounce early in the day after a big selling the previous day. Any long positions established today require bullish sentiment being maintained going into the close. Note that the current trading of the indexes are well below the T line. Confirmation of a bullish Harami as the possibility of a market bounce back up to the T line area. Again, this would be based upon bullish sentiment being maintained going into the close.