October 31st Market Wrap-Up

The Dow remains the most sensitive of the indexes, reacting with much more activity on bullish or bearish news. Today’s Chicago manufacturing numbers sent the markets lower with the Dow showing the most weakness. However, by the end of the day the NASDAQ and the S&P 500 closed toward the upper end of their trading range, utilizing the T-line as a support level. The uptrend remains in progress as long as the indexes continue to close above the T-line. The NASDAQ and the S&P 500 show more resiliency now that they have broken out through the upper resistance level of the sideways trend. The Dow and the transportation index are showing the most weakness based upon candlestick reversal signals. This could pull the NASDAQ and S&P 500 lower if the Dow shows more weakness from this level. The final criteria is still the T-line. The indexes need to remain above the T-line to confirm the bullish sentiment is still controlling the slow uptrend of this market.

The strength of individual chart patterns continue to produce good profitability, even when the overall market conditions do not show overall strength. Our recommendation on CVET was based upon a cradle pattern breakout. The 2+2 evaluation uses the expected results of a cradle pattern as well as a positive open confirming the cradle pattern by trading above the T line. The combination of candlestick patterns in conjunction with T-line expectations dramatically improves the probabilities of being in the correct trade at the correct time. This was also illustrated in Today’s positive trading in our recommendation of this past week in UCTT, forming a Doji/hammer signal supporting on the T-line followed by positive trading today clearly illustrates the bullish strength remains in this uptrend. Candlestick analysis is merely the identification of what investor sentiment does with a high degree of probability and utilizing confirming indicators that improve the probabilities.

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Good Investing,

The Candlestick Forum Team