The T-line rule assumption – the trading in the indexes up through the T line on Friday dramatically improve the probabilities of an uptrend in progress, even though the bullish trading of the previous two trading days did not produce pure candlestick reversal signals, but ‘almost’ candlestick reversal signals. The potential of a trend reversal logically produced scanning for bullish signals in individual stock charts.

The T line is obviously not a resistance level for the Dow and the S&P 500 and the NASDAQ. The 50 day moving average becomes the next viable target, which the NASDAQ is already touching. Numerous short positions have been closed out because of bullish reversal signals. The portfolio bias is now to the long side but with watching what the indexes do at the 50 day moving average.

Why is it important to know the simple details attributed to each candlestick signal? Simple, the Japanese rice traders have evaluated what makes a reversal signal for over 400 years. A candlestick signal has expected results. A non-candlestick reversal signal does not have the same reversal factors, otherwise the Japanese rice traders would have given it a signal name. Yesterday the major indexes traded bullish but opened above the previous day’s close, not forming a bullish engulfing signal.

The bounce failure at the T-line in the indexes on Friday demonstrated the lack of any bullish sentiment. The downtrend continues until evidence of reversal signals. Continue to stay predominately short. Even the oil stocks that showed bullish potential on Friday are selling off today. Utilize the T-line rule to keep from getting whipsawed.

The jobs report has produced positive trading today but currently producing indecisive/Doji formations. A bounce to the T line is the likely prognosis. That same scenario would apply to numerous stock price bounces. Shorts should be covered if that set up is performing an individual stock charts. Adding long positions in this area requires safety stops at levels that would indicate bullish moves have been stifled. The market indexes, although the prospects are moving up to the T line are still below the T line.

The indexes have gapped down today in the oversold condition. This warrants watching for a trend reversal in the markets. The downtrend continues obviously but be more alert for a potential reversal. Stay short.

Beware the bounce! It is not unusual to see an early morning bounce to the upside in a downtrend. The final criteria is the T line. Assume the market downtrend remains in progress as long as there is not a candlestick reversal signal and a close above the T line. Stay predominately short.

Although the Dow and the NASDAQ are showing potential support at the 50 day moving average, there is nothing as far as bullish signals indicating the downtrend is over. The S&P 500 and the transportation index still have more downside to get to the 50 day moving average. It is inflation over with? If the perspective of inflation slowing down last month was based upon a pullback in price of crude oil/gasoline prices, watch crude oil prices. They appear to have shown buy signals/basing at the 200 day moving average and moving back up. If Crude oil prices continue to move higher, that will indicate inflation is still going to be evident in the next inflation report. Stay predominately short. Energy stocks and lithium mining stocks continue to show bullishness.

What is one of the most important trend indicators that very few people have access to? The T line! Notice what acted as a crucial trend reversal indicator in the indexes. A bounce to the T line yesterday, but did not get through today.