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!