Being able to identify whether last week’s positive trading was merely a bounce or a full-scale reversal was made easy to analyze based upon the signal created on Friday. The major indexes all produced bearish Harami’s. Even though they did not occur in the overbought condition, they did occur at an important technical level, the T-line and/or the 50 day moving average.

The indexes are still having a hard time getting back up through the T-line/50 day moving averages. The expected bounce back up to these levels was indicated by the buy signals in the oversold conditions of the market. The next move to watch is to see whether the indexes can stay relatively positive going into the end of the day, continuing to put pressure at the breakout levels. A Friday in the middle of the summer may just be a wait and see day.

After a hard selling like we’ve seen in the markets over the past week, a reversal requires a confirmed reversal signal. Yesterday’s bullish Harami had the potential of starting the markets backup but as always, a candlestick reversal signal requires confirmation. With the continued selling in the indexes, especially opening below the open of yesterday, the strength of the selling is still evident.

The expected bullish confirmation that was illustrated over the past couple of days is in progress. The bullish Harami and the hammer signal of the past two days in the oversold area was a good indication that this is where the Bulls were starting to step back into the market. Anticipate the first move back up to the T-line, making any short positions that are showing buy signals being ready to be closed. There are some strong bullish signals, such as bobble breakout’s and scoop patterns that are providing very high probability/high profit trade set ups.

After a hard selling like we’ve seen in the markets over the past week, a reversal requires a confirmed reversal signal. Yesterday’s bullish Harami had the potential of starting the markets backup but as always, a candlestick reversal signal requires confirmation. With the continued selling in the indexes, especially opening below the open of yesterday, the strength of the selling is still evident.

The apparent knee-jerk reaction about interest rates in yesterday’s trading is being pretty well offset in Today’s trading. This does not indicate there may be any change of the sideways motion of the markets, but it does illustrate yesterday’s selling was not a major change of investor sentiment. The T-line worked as a very efficient indicator pertaining to individual stocks, demonstrating a lack of change of investor sentiment on positions that sold off but did not close below the T-line. Continue to hold long positions that remain above the T-line as well as maintaining short positions that are not demonstrating reversal signals.

The market direction remains indecisive/flat. This continues the market conditions for having both long and short positions in the portfolio i.e. XLNX and GRUB good shorts, TWTR and numerous frypan bottoms good longs. As long as there is not anything showing a major change of investor sentiment, the sideways mode of this market will still produce good profitable long.

Although the market indexes are trading lower the candlestick formations reveal buying since the open, creating bullish candles. This implies that although the markets appear to be sideways/soggy, there has not yet been any evidence of mass selling. With that analysis it should be implied that the current trend of the market is still in progress, sideways.

Although the Dow is trading flat Today, note that the NASDAQ gapped up to where it opened above yesterday’s open. This strength, along with the S&P 500 and the transportation index trading higher clearly illustrates that there is no major selling confirmation after yesterday’s selloff. The T-line remains a viable uptrending support level. Stay long, nothing yet has indicated any selling sentiment in the markets. Strong earnings reports are the catalyst. This is why waiting for confirmation from either the Bulls or the Bears is important when a price/trend is trading right at the T-line.

The T-line remains a strong indicator, acting as an uptrending support level. It makes sitting through a slow uptrending oscillating market trend much more comfortable. Fortunately, candlestick analysis incorporating high probability confirming indicators keep emotions from controlling the decision-making process.