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Daily Market Comments - July 2006



7/31 - Stock Market Comments


The Dow closed right near the recent highs of early July. The NASDAQ negated the Bearish Engulfing signal that formed on Thursday. It closed right on the 20 day moving average. The Dow has moved into the overbought condition while the NASDAQ appears to still have more upside potential based on the stochastics. Currently the uptrend should still be in effect but how the Dow performs at these levels will be important. These levels have acted as resistance for the past two months. A candlestick sell signal at these levels would reveal another peak. Continue to hold the long positions in the strong sectors. Short positions should be stopped out on continued strength.

7/28 - Stock Market Comments

The Dow formed a Shooting Star/Doji signal Thursday, the NASDAQ formed a Bearish Engulfing signal. Unless something external creates very strong bullish participation in the market today, Thursday's signals reveal a lack of strong bullish sentiment. This may not indicate strong bearish sentiment, it may be more of an indication of a sideways movement of this market. The scans are still providing opportunities on the long side in some sectors as well as opportunities on the short side in other sectors. Without a definite trend in this market, the strategy should be to maintain some long positions and short positions in the portfolio. Sluggish market movements, such as we've experienced over the last six weeks, are not unusual for the mid-summer trading period.

7/27 - Stock Market Comments

An uptrend will usually be stronger when the early-morning selling occurs and then the buying gets going again in the afternoon. This is what we saw in all the markets on Wednesday. The Dow formed a Doji after it opened and came back down and tested the 50 day moving average. The NASDAQ formed a Spinning Top. Keep in mind that a trend will usually move in the direction of how prices open the next day after an indecision day. This morning's futures clearly indicate a positive open. The stochastics are in a steep uptrend and only about half way through the trend. This illustrates a high probability of at least a few more days to the upside. Keep adding to the long positions.  

7/26 - Stock Market Comments

The Dow had the opportunity to resist the 50 day moving average. The NASDAQ, after the Kicker signal that formed on Monday, still had the opportunity to show an indecisive trading market if it had sold off on Tuesday. The strength seen in the Dow brought it up through the 50 day moving average. With the stochastics in an upward direction, the positive trading on Tuesday indicated the investor sentiment was starting to become comfortable with the Middle East situation. Earnings seem to be adding confidence to the markets. As long as the Dow continues to trade above the 50 day moving average, what could have been a downward bias  with a failure at the 50 day moving average should now be looked at as a positive bias. Although the markets may still be in a choppy mode, adding some long positions for the short term should be the correct strategy.  

7/25 - Stock Market Comments

The strong run-up in the Dow closed right at the 50 day moving average. There should be expectations of some profit-taking today. The morning futures indicate a flat to slightly negative open. This now makes the 50 day moving average a very critical level to watch. A failure to go up through that moving average today would create more suspicion that the 50 day moving average is going to act as resistance like it has for the last two months. Seeing any weakness in the markets today would add more evidence of the slow, choppy, sideways movement that the markets have  experienced over the last six weeks. To continue the bullish trend that  started last week, today's trading needs to close near the high end of  the trading range.    

7/24 - Stock Market Comments

The uncertainty of the Middle East crisis led to weakness going into  Friday's close. This morning the futures are showing good strength.  However, the markets are not showing any decisive move one way or the  other. Until a definite signal reveals the direction of investor  sentiment, anticipate the markets continuing to work in a choppy mode.  This is not unusual for mid-summer. Although the volatility has been  more decisive this summer over last summer, the market direction has  not provided any great insights. These are market conditions  that should be participated in with smaller trading capital until a  definite direction can be identified. This may seem like a nebulous  analysis but currently the indicators are not providing any evidence  that would put probabilities in one's favor. When that scenario occurs,  lighten up on investing. The point of candlestick analysis as well as  any technical analysis is to be able to identify factors that produce  an improved probability of making money. When those factors are not  present, it is time to back away and take a vacation from the  markets.          

7/21 -Stock Market Comments

The markets mostly were taking profits on Thursday. The Dow closed  right near the 200 day moving average. The NASDAQ gave up most of  everything it gained the prior day. With options expiring today,  anticipate a choppy market. However, to get a true bullish signal, the  markets need to be up relatively strong. A strong bullish candle in the  NASDAQ would create a Stick Sandwich signal. This would definitely  reveal a bottom reversal. A weak trading day will cause more choppy  trading in the near future.       

7/20 - Stock Market Comments

The evaluation of a market trend should be based upon what the  signals are illustrating. Wednesday's evaluation of a choppy market was  based on the fact that there was still upheaval in the Middle East. The  true factors were built into the market signals. Both the Dow and the  NASDAQ were illustrating indecisive trading signals over the past  couple of days with stochastics well into the oversold area. The  simple evaluation should have been as always. Which direction will the  market move after indecisive signals in the oversold condition? The  magnitude of Wednesday's move clearly indicated which way investor  sentiment had turned. Anticipate some profit-taking but, overall, the  current uptrend should persist for at least a few days. On Wednesday,  as the strength was immediately seen coming into the market, short  positions that were also showing indecisive trading in the oversold  area should have been covered immediately.    

7/19 - Stock Market Comments

The final 30 minutes of Tuesday's trading showed buyers coming into  this market. Both indexes are in the oversold condition. The Dow closed  more than halfway up the previous dark candle. The NASDAQ formed a  second Doji. With the markets opening relatively flat this morning,  anticipate an additional day or two of potential choppy trading before  we get a clear indication of whether they start taking the market back  up. Although the markets appear to be bottoming, confirmation is  required. IBM came out with a positive earnings report, YHOO came out  with a negative earnings report. This combination did nothing to move  investor sentiment one way or the other. Continue to hold short  positions that have not demonstrated buy signals and start adding long  positions showing good bottoming reversal signals.

7/18 - Stock Market Comments

Both the NASDAQ and the Dow formed Doji signals on Monday with  stochastics getting into the oversold condition. This morning's futures  show a slightly positive open. This starts the set-up for a possible  bounce. However, the magnitude of the strength of the trading today  would be an indication of whether the next couple of days would show a  short-term bounce or a full-scale reversal. The description of this  market reaction is described in last night's newsletter. Watch the  short positions. If they start showing bullish reversal signals, start  covering.  

Last night's newsletter - Enhance'>http://web.archive.org/web/20070702093111/http://www.candlestickforum.com/PPF/Parameters/11_831_/candlestick.asp">Enhance Price Moves in Market Trends with Candlestick Signals

7/17 - Stock Market Comments

The markets did not give any indication of any great buying recovery  on Friday. The stochastics for the NASDAQ have gotten into the oversold  condition but have not yet shown any buy signals. The Dow did get right  to the recent low area from mid-June but the stochastics still show  some more downside potential. Although the news from the Middle East  seems to be getting better, anticipate another day or two of bottoming  action before the markets can start turning back up. Continue to hold  your short positions but start nibbling at some sectors that may show  some strength, such as the oil stocks.  

7/14 - Stock Market Comments

Nothing was indicated on Thursday that the buyers were stepping in,  the sellers were still in control. The 200 day moving average for the  Dow did not act as support. The NASDAQ did not support at the recent  lows of mid-June. Stochastics show that the trend still has a day or  two at least to the downside. The nervousness in the Middle East  should thwart any aggressive buying before the weekend. Continue to  hold shorts unless something big gets resolved in the war zone today.

7/13 -Stock Market Comments

The downtrend is obvious. What could have been a potential bounce on  Tuesday was diminished completely on Wednesday. The 200 day moving  average still appears to be the target for the Dow. That level could be  reached early this morning. The NASDAQ is getting near the bottom that  formed in June. Expect at least a couple of more days to the downside.  Crude oil prices continue to pick up strength due to world  political events. Continue to remain predominantly short but now watch  for oil stocks to start moving higher in the short-term.

7/12 - Stock Market Comments

Tuesday's bounce in the markets was the first indication that the  current downtrend may be slowing down in the NASDAQ. The Dow, however,  is still showing stochastics that reveal more downside potential. The  oil stocks picked up strength on Tuesday as a reaction to the Iranian  situation. Although there may still be some downtrend in the overall  markets, the oils might start maintaining strength here. Continue to  hold short positions in the weaker sectors.

7/11 - Stock Market Comments

On Monday, the early morning strength in the markets brought the Dow  right back up to the 50 day moving average. It failed at that level and  closed back down near the low end of the trading range. The NASDAQ  showed weakness all day long. Alcoa missed their earnings by a penny,  it will sell off hard this morning. When the markets are in a downtrend  and the earnings do not meet expectations, they will get hit hard. The  stochastics reveal more downside potential in this market. The  portfolios should be heavily weighted to the short side.   

7/10 - Stock Market Comments

The weakness after the Doji signals confirmed the direction of the  market on Friday. After four days of the Dow trading right at the 50  day moving average, Friday's trading finally revealed which way the  investor sentiment was going to move. Although we may be seeing the  initial buying strength in today's futures, be prepared for more  selling over the next few days. Oil stocks continued to show weakness.  Heavy construction stocks also showed sell signals on Friday. We are  now going into earnings season. Do not expect individual stocks to hold  up well if they miss their earnings expectations.  

7/7 - Stock Market Comments

Although the Dow closed strong on Thursday, the other indexes formed  Doji signals. That makes today's trend analysis relatively easy. A  trend will usually move in the direction of how prices open the next  day following a Doji. After this morning's jobs announcement, the  futures went from positive to negative. A weak day in the markets would  provide more evidence that the moving averages had acted as resistance  to this latest rally. A weak day today would warrant adding some more  shorts to the portfolio. 

7/6 -- Stock Market Comments

The Dow formed a Bearish Harami right on the 50 day moving average.  The stochastics are in the overbought area. The NASDAQ formed a  Kicker-type signal to the downside. Today's trading will be very  indicative of market direction. What should be seen at a major moving  average after a Bearish Harami? Continued selling. That would reveal  that the sellers were now taking control. On the other hand, a positive  trading day in the markets would reveal that the 50 day moving average  in the Dow was just acting as a consolidation area during an uptrend.  This makes portfolio positioning relatively easy. Add short positions  if the market closes weak today. Anticipate further upside movement if  the market closes stronger today. Being able to analyze what the  signals should be doing at specific technical levels allows an investor  to plan accordingly.

7/5 -- Stock Market Comments

The market acted strong on Monday but the North Koreans scare will  probably keep it  subdued most of the day today. Unless a severe sell  signal occurs in the market today, anticipate more upside movement. The  stochastics indicate a few more days to the upside before any  major consolidation should take place. Unless the selling from the  initial open starts showing buying going into the afternoon, we would  not be buying aggressively today. Earnings season is starting up over  the next few weeks. This should have a major affect on the market  during that time.

7/3 -- Stock Market Comments

The markets will only be open a half day today, do not expect any  great movement one way or the other. See you Wednesday, have a good  holiday!   

 

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