Black Candle Tuesday…

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What do Black Candles on a chart mean?  Look at the chart below, and you tell me.  Look at what happened after each black candle occurred.  I can only find one time that a black candle occurred and the market continued in the same direction the next day.  That was the first week of November.  Notice that a black candle occurred after an up day, and the next day continued up too.  Other then that, every black candle produced a move in the opposite direction the next day.

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So, does that mean the top is finally in now?  Maybe?  Or maybe we just pull back for one day and then rally some more on Thursday and Friday.  There is some heavy resistance at 113.00-113.50 spy, and that might be the finally high, before a nice sell off.  Or, today could have been the high?  I think it's all about the ADP numbers out tomorrow morning.

And since they already released some rumors that the numbers aren't good, in an attempt to lower the market expectations, I think we are nearing an end of the crack driven rally these bulls have been on.  A turn is coming soon... if not tomorrow, then Thursday or Friday should produce a final top, and begin some selling.  Nothing goes up forever... not even bulls with unlimited funds.

Red

And here is a special song for the bulls (aka Johnny), entitled "Shooting Star" (Black Candle)...

62 COMMENTS

  1. Great Post Red 🙂 the recent daily candles certainly look like we're topping here.

    I've been singing “Shooting Star” in my head all night!

    • Well girl… I don't know if any sell off will hold, but I think we will pull back some tomorrow. You know they could release really bad ADP numbers tomorrow, but fudge some other numbers on Thursday and Friday, which could stop any serious sell off from occurring.

      I believe they are waiting for something to happen first, before they dump the market. It could be Obama's healthcare bill, or it could the $10 Billion Dollar Bill that would extend unemployment benefits so more.

      There is another $145 Billion Dollar Bill that includes prolonging unemployment insurance until the end of the year. The vote is expected on that bill by this Friday.

      Any or all of those could be the reason they won't let the market sell off yet. Very frustrating, as you have to be crazy to go long from these levels, and even more insane to think they will let you make some money on any down trend.

      Tough to be a swing trader in this market. Too much manipulation. Technicals don't work any more, as every down move gets bought back up… for no friggin reason!

      I got one small short position right now, and no longs. When the move down does start, I'll probably miss it anyone… LOL

  2. Thanks Red – the black candle indeed makes it look like we are in for a down day tomorrow but I see a case of a black candle on around Nov 14 in your chart where we continued higher after a move down the next day. Everything else looked about the same then. So, it's possible we continue to chop for a while (hope not). Anyway, news doesn't matter as we have seen. My guess is the number will be good just to really surprise everyone but there may be no market reaction.

    • In the end Monica, I finally come to realize that technicals don't really work too well. If they followed logic, the market would be at 3000-4000 on the dow now.

      But, insanity seems too be how the market is driven, not logic… so, I'll just wait for panic to replace insanity, as waiting for logic too happen might put me in my grave first.

      • For the record, I'm not trading the misprint since I'm long with ATM SLV calls (though also short with OTM SLV puts).

        However, seeing the market follow that misprint would tickle me to the verge of peeing my pants.

  3. that's not a misprint

    the terminal de-leverage pt. for the $SPX is 733.22 which correlates well with the $DJI 7,400 range on the $DJI

    File that one away, the market will be to these numbers before the summer solstice of 2011.

      • lol it is, the first major reaction on the road to $SPX 733.22 will come from the $SPX 965.95 region.

        I don't have any numbers for the wilshire but it syncs well with the $SPX

          • the earliest would be in the late summer

            if the characteristics of the market don't change in the month of April then things could wait until the first few months of 2011

  4. From Carl just now:

    March S&P E-mini Futures: Today's range estimate is 1116-1130. I expect the market to reach 1200 over the next three months.

    From here (1119.75), thats -3.75 to +10.25

    Carl owns one unit of /ES at 1098.50 (+21.25) since last Friday

  5. important gaps this morning:

    IWM gapped over it's January highs

    $SPX index had an opening gap

      • May as well. TZA victories are hard to come by lately 🙂

        Wild guess: there is some concern about all the economic news coming out tomorrow.

        Another wild guess: it's a legitimate concern 🙂

        • News doesn't matter. Everyone is banking on that news. 41 day cycle top Monday. We top Tuesday or Wednesday. I'm hanging on. We may have a down day tomorrow but then we'll have an up day Monday. Choppy till we top.

          • I agree. I'm still 100% short. Just using the day trading buying power to try to stay afloat. I close out those positions at the end of every day. But we could top anywhere from here to next Wednesday IMHO. If we go higher after that, I really become skeptical.

  6. Carl at days end:

    1116 – 1130 today's range estimate.
    1115.50 – 1125 actual range for today

    Carl’s trades

    In 1119 out 1116 (loss of 3 in one day)
    In 1098.50 last Friday out at 1119 today (gain of 20.5 over 4 day period)

    Grade: A

  7. round and round we go, you'll notice the operators stopped the $SPX 2 pts. shy of the 1127.38 gap

    now this morning I alluded to the $SPX index gap @ the opening which is now very important because coming into today the $SPX had 5 consecutive higher closes than opens. The operators closed the $SPX index below it's open fulfilling it's consecutive close sequence.

    Looking ahead to tomorrow: we've had 4 consecutive gap downs on Thursdays so that charade is getting exhausted and with the payrolls friday a flat opening seems most likely.

  8. TNA gapped up for the 3rd day in a row. The gap up was 1.3% and TNA closed up 1.3%. TNA was up 3.2% today at its peak.

    We are in a Full Moon Trade, which favors TNA.
    After three days, this trade is up 9.7%.

    Volume today for TNA was roughly normal for these past 13 days.

    $RVX (VIX for $RUT) closed 0.1% higher with TNA up 1.3%. A tiny bit of a divergence (they should go different directions) and possibly bad for TNA, for the 2nd day in a row.

    TNA has been up 14 of the past 16 days.

    The high for TNA today was $48.98, the highest TNA since Oct 21st.

    Ultimate Oscillator for TNA peaked at 78 eight trading days ago and has generally fallen since then but has remained above 50 and is currently 66. Indicating continued strength for TNA.

    However, TNA today closed 8% higher than that day with the peak Ultimate Oscillator value. A higher close with a lower Ultimate Oscillator value might be seen as negative divergence indicating that TNA is due to fall.

    Also, TNA was up 1.3% today, but the Ultimate Oscillator dropped from 68.3 to 66.9 – a bit of a divergence & the 2nd day in a row for such a divergence.

    Bollinger Bands for $RVX (VIX for $RUT): today’s doji candle closed farther from the lower band and the lower Bollinger band dropped **off the chart**. Since the candle was a doji and the bottom of the band can’t be seen, best to call this indecisive.

    Bollinger Bands for $RUT: $RUT rose to near the upper Bollinger Band, but that upper band rose today, indicating that $RUT could rise again tomorrow, favoring TNA.

    Bollinger Bands for $RUT:$RVX ($RUT vs VIX for $RUT): today’s candle was a doji (sort of), and remained in the area of the prior two candles. Best to call this indecisive.

    http://www.americanbulls.com had TNA as a BUY on Feb 9th, and hold since then. TNA remains a hold for tomorrow.

    Overall, it looks like TNA continues to move above an area of congestion and might continue rising tomorrow. The doji and the divergences seem to be warning of a possible reversal tomorrow.

  9. Americanbulls.com view:

    TNA is a SELL-IF (sell tomorrow if conditions are right). Today and yesterday formed a Bearish (Doji) Star Pattern. Sell TNA tomorrow when it seems likely that TNA will close with a down day and with a red candlestick.

    TZA is a BUY-IF (buy tomorrow if conditions are right). Today and yesterday formed a Bullish (Doji) Star Pattern. Buy TZA tomorrow when it seems likely that TZA will close with an up day and with a green candlestick.

    • Correct me if I am wrong. The way I understand it, AmericanBull uses the opening price as their execution price. But their BUY-IF and SELL-IF confirmations are based on post opening analysis. How on earth can you buy at the Open, AFTER the open? What am I missing?

      • I don't think you are missing anything 🙂

        As I see it, there is the human side of this, and the automated side.

        They run programs after the close to calculate the automated after-the-fact view of things.

        After the close, it's pretty easy to see whether taking action at the open (or the close or any where really) is a good idea or not. In that respect, they make themselves look pretty smart, and avoid looking foolish.

        Not real honest. And not exactly what a human could hope to accomplish.

        • They post the performance result based on such method and it sure looks good at first glance. Bail and switch.

          • For all its flaws, I like it. Gives me another perspective, one not based
            on news (or fear of news), and one that's not naturally bullish or bearish.
            Plus, what I get is free 🙂

      • But then again, humans can decide when to play and when not to play. Or whether to play small or go large.

        That should allow a human to do better then americanbulls, even when the entries and exits are not perfect.

  10. They post the performance result based on such method and it sure looks good at first glance. Bail and switch.

  11. For all its flaws, I like it. Gives me another perspective, one not based
    on news (or fear of news), and one that's not naturally bullish or bearish.
    Plus, what I get is free 🙂

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