Archives for July 2016

The Dow and S&P 500 have now pulled back to where they are trading below the T-line again. The NASDAQ continues to show strength, at least not any great selling influence. The Dow and S&P 500 have been showing bearish sentiment, although relatively slight, over the past five or six days of trading. A close below the T-line today would be strong evidence that the pullback might be continuing with more enthusiasm. Be prepared to take profits on long positions. Having a few short positions in the portfolio with the market conditions showing tiredness is viable.

After a few days of consolidation, yesterday the Dow formed a Doji/hammer signal right on the T-line. For the slow bullish uptrend to remain in progress, today’s trading needed to see a positive open and positive trading, continuing to keep the Dow trading above the T-line. It would not be good to see the Dow close back below the T-line today. A possible warning flag is seen that the NASDAQ has gapped up in the overbought condition. This is usually the candlestick chart conditions to start watching for a possible reversal/pullback in the markets. Continue to stay long but be aware of whether the markets can push higher. If trading languishes in this area for most of the day, be prepared for some selling in the next couple of days.

The T-line continues to act as a relevant indicator, showing the trend remains bullish. Each day continues to show one index not moving very much while another index trades slightly positive, merely indicating the movement of funds from one sector to another. The analysis remains simple, as long as the indexes are not showing sell signals and trying to close below the T-line, the slow steady summer uptrend remains in progress.

Today’s lack of conviction in the markets continues to reveal consolidation/profit-taking after a nice strong bullish move over the past four weeks. Be prepared to take profits on confirmed sell signals. However, numerous bullish charts are not showing any strong reversals, merely sideways consolidation. Candlestick charts allow investors to visually witness when the selling has definitely taken control. Until that time, hold long positions.

The NASDAQ is showing good strength today, potentially forming another little J-hook pattern to the upside. The Dow and S&P are also trading positive but not with any great strength so far today. Although the uptrend remains in progress, there still remains signs of a possible profit-taking reversal. The gap up in the indexes on Thursday, as well as moving away from the T-line in the overbought condition, makes the prospects of a reversal more likely. Continue to stay long but be prepared to take some profits on signs of weakness in the market.

There is a warning flag today. Where do most people buy? They buy exuberantly at the top. Exuberance can be illustrated with a gap up in the overbought condition. This is what has occurred in the Dow and the S&P 500. Does this mean the uptrend is over? Not necessarily, but be more diligent as far as watching for the selling/sell signals. Continue to stay long but be prepared to take profits if today’s strength starts dissipating.

The indecisive trading in the markets this morning is not unexpected. Wave three is now approximately the same length as wave one of the Dow’s J-hook pattern. The indexes have moved away from the T-line, creating the expectation of some consolidation. The markets could move sideways or pullback until the T-line catches up. Expects some profit-taking in this area.

The uptrend/J-hook pattern continues in the market indexes. Today’s trading currently demonstrates a solid day in the Dow, S&P 50 and the NASDAQ. The most compelling chart today is the transportation index up, up strong and forming a Doji sandwich, illustrating the 200 day  and 50 day moving average are not acting as a resistance level. Continue to stay predominantly long but expects some profit-taking with the indexes moving away from the T-line.