Typical Bullish Monday… »  
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Black Candle Tuesday…

By Red, on March 2nd, 2010

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.

sc

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)…

Falling Dollar...

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  1. Black Monday?

Leo's Den
  • BloodWine

    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!

    • http://www.reddragonleo.com Red Dragon Leo

      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

      • BloodWine

        Did you see Dodd's and Corker's latest proposal to put the Consumer Financial Protection Agency in the hands of the Federal Reserve? One word – Oxymoron

        • http://www.reddragonleo.com Red Dragon Leo

          Almost as dumb as letting the Federal Reserve invetagate Goldman Sach. LOL!

          P.S. Refresh your page if you'd like a like Bad Company to cheer you up.

          • BloodWine

            Thanks Red :)

      • monicadern

        Fundamentals don't matter in the short term.

  • monicadern

    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.

    • http://www.reddragonleo.com Red Dragon Leo

      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.

  • raised_by_wolves

    Red, check this out:

    http://content.screencast.com/users/raised_by_w…

    Hell of a misprint, eh?

    • http://www.reddragonleo.com Red Dragon Leo

      Holy cow! If that ever happens, a lot of bulls will be steak… LOL

      • raised_by_wolves

        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.

  • sundancer390

    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.

    • monicadern

      But isn't this a chart of the Wilshire?

      • sundancer390

        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

        • Scraoppy

          Sun

          What's your timing on hitting 965.95 area? thanks

          • sundancer390

            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

  • Earl of

    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

    • gcocks83

      Earl, GM thinking about putting a stop on my tza at 8.22.

      • Earl of

        I stopped out at 8.29

        In TNA at the moment.

        • gcocks83

          Thanks, good luck

      • Earl of

        $RVX is rising as is TNA — a divergence of sorts

        • http://dreadwinaard.livejournal.com/profile dreadwin

          It is preventing the $RUT:$RVX from giving a sell signal. Very annoying.

      • Earl of

        I'm now in harmony with americanbulls, in harmony with my rule (never own below the pivot line), and deeply uncomfortable buying something after it's up 30% from Feb 9th.

        • http://dreadwinaard.livejournal.com/profile dreadwin

          $RUT is less than 1% away from the BB. Your max upside on TNA for today is between 2-3%, assuming $RUT respects the BB (it nearly always does).

          • Earl of

            I sold my TNA below the R2 line.

            So far, R2 looks like resistance. So far.

  • sundancer390

    important gaps this morning:

    IWM gapped over it's January highs

    $SPX index had an opening gap

  • sundancer390

    $SPX 60 min update
    http://www.flickr.com/photos/47091634@N04/44034…

    the reaction yesterday afternoon backtested an important trendline

    market is getting heavy

    • gcocks83

      Thanks for the update Sundancer.

  • sundancer390

    $RUT : IWM daily update
    http://www.flickr.com/photos/47091634@N04/44034…

    IWM 65.70 is the next opportunity for a reaction

  • Earl of

    Carl went Long second unit /ES at 1119.00

    • http://dreadwinaard.livejournal.com/profile dreadwin

      He is probably thinking we have a short squeeze today as bears run for cover.

      • gcocks83

        Would you scale into any TZA at this point?

        • http://dreadwinaard.livejournal.com/profile dreadwin

          If I had infinite money, sure :)

          It's too early. $RUT:$RVX is not giving a “short” signal (yet). If $RUT closes outside the upper BB, I would be tempted to get involved with TZA at one minute before the close today. I should think we're going to have a real short squeeze coming sometime soon.

          • Earl of

            Dreadwin,

            I saw the change in character of $RUT:$RVX (was rising, now is flat), but don't much know what it all means. What does a short signal look like with $RUT:$RVX?

          • http://dreadwinaard.livejournal.com/profile dreadwin

            When $RUT:$RVX closes outside the upper BB on day 1, and inside the upper BB on day 2. For day 3, we'd like to see a lower close than day 2.

          • Earl of

            Dreadwin,

            Thanks!

            Hope I can remember that. Several days away at best.

          • http://dreadwinaard.livejournal.com/profile dreadwin

            The last signal given was a buy signal around Jan. 22nd-ish. You would have had to ride it (TNA) all the way down, but … you'd be up 15-20%. Fewer trades, but higher percentage “win” and certainly better than american bulls over that timespan (although it would have looked dire at first).

          • AS2009

            Dread – can u share a chart link for the same $RUT:$RVX ….

          • http://dreadwinaard.livejournal.com/profile dreadwin

            My chart:

            http://www.screencast.com/users/dreadwin/folder…

            Go to stockcharts, add bollinger bands and watch the ratio of $RUT:$RVX.

          • gcocks83

            I like that. I thought you did.

  • sundancer390

    an interesting look @ the former general of the bull army GS
    http://www.flickr.com/photos/47091634@N04/44043…

    the TA enthusiasts see a bear flag, what they don't know is what is containing GS

    ideal setup is a short at the intersection of the red & teal containment points

  • Scraoppy

    Sundancer

    Whats your timing on when we should hit the SPX 965 mark?

    thanks

  • Earl of

    Carl sold one unit at 1116.00

    In at 1119, out at 1116 (loss of 3)

    • gcocks83

      Should I consider that a victory for owners of TZA. LOL!!

      • Earl of

        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 :)

        • monicadern

          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.

          • http://dreadwinaard.livejournal.com/profile dreadwin

            I think closing shorts now is essentially buying near the interim term top. I hope I'm right about that.

          • monicadern

            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.

  • Earl of

    Carl sold other unit at 1119.00 – now flat

  • Earl of

    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

  • sundancer390

    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.

  • sundancer390

    for those wandering why there is so much dancing in the SPY 112.72 area, this maybe of interest to you
    http://www.flickr.com/photos/47091634@N04/44050…

    if this trendline doesn't produce a reaction very soon, a large uni-directional move will ensue over the TL

  • Earl of

    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.

  • Earl of

    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.

    • SC

      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?

      • Earl of

        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.

        • SC

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

          • Earl of

            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 :)

      • Earl of

        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.

  • SC

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

  • Earl of

    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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