Tuesday, July 21, 2009

Hanging Man and Dragon Fly Doji

Click on Charts to Enlarge

All the notes are on the charts. All three major index ETF's showed textbook reversal candlesticks today. They are not the "strongest" of reversal candlesticks, but taken together with chart based resistance and overbought indicators, they should be paid attention to. In order to get some confirmation it is nice to see a gap down and a close below the open tomorrow. In fact, if there is no lower close tomorrow, then those tricky bulls probably took one of their guys and dressed him up in a bear's suit to act as a decoy.

The Russell ETF, IWM, also showed a somewhat odd Bearish Belt Hold today. It gapped up and sold off immediately and closed almost unchanged from yesterday, but down slightly. The gap being sizeable and the lower close should give weight to this pattern, but there is also a signifcant lower shadow, which is not really part of the classic pattern. I don't know that I've ever read anything in regards to how significant that shadow is on a belt hold pattern. In any case, that pattern is not more than medium reliability. However, the Russell has not made new highs for the rally, so there is still some measure on non-confirmation in the indexes this point.


  1. Hi Peter, came across your blog this weekend. Your TA charting is impressive (given all the TA blogs I'm searching around and my 15+ yrs. TA trading.)

    Concerning breadth and volume, both have been tailing off in recent weeks. Take today's close up while declining stocks outnumbered advancing. Yeah, the non-confirmation divergences are starting to stick out. Opposite of late February and early March when the major indexes were making new lows while the breadth and volume giving positive divergence. Now we have the major indexes are making new highs while internals remain weak.

    Keep up with your great work, Jimmy

  2. Thanks Jimmy

    I concur with the breadth divergence. I entered some mean reversion type trades early last week and am getting killed on paper right now. This move pretty much has my emotions convinced this is a blast off to another move up, but objectively I just don't see it.

    It is a little weird, but with prices being at the same level as a month and a half ago, but the euphoria and positive expectation is palpable (and audible from media).

    Could be way off, but I think this is topping action.