Logical trend assessments can be made when witnessing continuity in all the indexes. Today, the Dow, S&P 500, and the NASDAQ all had the same candlestick indications. They each created sell and closed below the T-line. On days when one index is up and another may be down, the common sense analysis is that there has not been any change of investor sentiment, the trend will usually continue. However, on days when all the indexes are moving in the same direction and as seen in today’s trading, closing below the T line, it is much more evident that there has been a general change of investor sentiment across-the-board. The magnitude of the sell signals today also indicated there had been a change of investor sentiment. This does not necessarily indicate a major reversal of the market indexes but at least it shows there is a higher probability of a pullback/consolidation stage setting up in the markets. This analysis allows option traders to make a much more decisive decision-making process when evaluating individual stock positions that might not be showing excessive weakness, but it does indicate the time factor may be about to reduce the time premium in specific positions.
The T line remains a very strong trend indicator. Individual stock positions that may have shown weakness and close below the T line now have the improved prospects of pulling back. They become positions that may be closed. When the market shows weakness and individual stock positions continue to trade above the T line, this becomes a clear indication that those bullish positions are not being affected by the market.
We will conduct a “Members Only” chat session tonight at 8:00 pm EST.
Good Investing,
The Candlestick Forum Team
