Tag Archives: spx

3 Most Important Things to Consider for Candlestick Reversal Patterns | 11th October, 2017

This daily chart of the S&P 500 identifies 16 candlestick reversal patterns. Only reversal patterns are considered here, not continuation patterns.

S&P500 2017
Click chart to enlarge.

The first #1 and #2 patterns are both Three White Soldiers. Pattern #1 comes after a short sharp fall in price, so it may be considered a reversal pattern. But pattern #2 comes within an upwards trend, so it is more of a continuation pattern here and would not be considered a reversal pattern as there was nothing to reverse.

This leads to point number 1:

For a reversal pattern to have meaning there must be something to reverse. A bullish reversal pattern should come after a decline in price. A bearish reversal pattern should come after a rise in price.

Pattern #3 is an important reversal pattern and it does come after a steady rise in price. It correctly predicted a consolidation.

This leads to point number 2:

Reversal patterns mean a reversal of the prior trend to the opposite direction or sideways. They do not only mean a complete 180 degree reversal; sideways is a direction too.

The Shooting Star at #4 does not come after a bullish rally. It comes within a consolidation, so it should not be considered a reversal pattern. This is another illustration of point number 1.

Likewise, the Bullish Engulfing pattern at #5 comes within a consolidation. There is nothing here to reverse.

The Piercing Pattern at #6, however, does come after a short sharp fall in price, so it should be considered a reversal. It did correctly predict the following 7 days of upwards movement.

This leads to point number 3:

Reversal patterns make no comment on how far price may travel in the new direction.

The Morning Star at #7 is the second reversal pattern at lows after a short sharp fall. Along with the Piercing pattern, it correctly predicted the next rise in price.

However, the Bullish Engulfing pattern at #8 does not come after a fall in price. It comes within a consolidation. There is nothing here to reverse, so it should be ignored.

The Gravestone Doji at #9 is normally a bearish reversal pattern. Its forte is in calling tops. Here, it comes at the end of a bearish movement, so it is out of context. It cannot be calling a reversal in a bull move as there was no bull move prior to the pattern.

At #10 the Bullish Engulfing pattern does come after a reasonable fall in price, so it should be considered a reversal pattern. This pattern was followed by a persistent bullish move.

Like the Gravestone Doji, the Dragonfly Doji at #11 is out of context. Here, it is at highs and within a small consolation. Dragonfly Doji are bullish reversal patterns when they occur after a bearish move, but this one does not.

Another pattern within the consolidation at #12 should be ignored. There is no bullish move here to reverse for the Bearish Engulfing pattern.

The Hammer pattern at #13 does not come after a reasonable bearish trend; it was only the second day of a fall in price. There is nothing to reverse, so it should be ignored. The long lower wick is still bullish though. As a Hanging Man pattern it would require bearish confirmation in the following candlestick, which did not come.

The Hanging Man at #14 though does come after a bullish move. But the bullishness of its long lower wick still requires bearish confirmation, which did not come. The following candlestick is quite the reverse; it is another bullish signal. As #15 comes within a small consolidation, it may be considered as a bullish signal.

Finally, the Piercing pattern at #16 comes after a long upwards trend, so it should be considered as a bearish signal.

Published @ 05:57 a.m. EST.

All Gaps Have to be Closed – Myth or Fact? | 3rd October 2017

The answer to the question is in the charts. If gaps can be seen, which were not filled, then not all gaps must be filled.

SPX 2017
Click chart to enlarge.

Some markets have more gaps than other markets. Gold is a global market and rarely has gaps at the daily chart level, but it may have gaps occasionally at the hourly chart level and below.

The S&P500 is a good example of a market with gaps.

There are two examples of gaps not filled in the daily chart above for the S&P500, from price movement during February of 2017. To this day, 8 months later, these gaps remain unfilled.

Published @ 05:10 p.m. EST.

Volume and Breakouts – Is it Necessary? | 11th August, 2017

This chart was published two days ago. At that time, it was warned that the possible upwards breakout of the 8th of August lacked support from volume and may turn out to be false:

S&P500 Daily 2017
Click chart to enlarge.

That was proven correct. The strong downwards movement from the S&P comes on a day with an increase in volume. This is a classic downwards breakout.

When a downwards breakout has support from volume, that adds confidence in it. Downwards breakouts do not require support from volume; the market may fall of its own weight. Price can fall due to an absence of buyers as easily as it can from an increase in activity of sellers. But when volume supports downwards movement, it may be more sustainable, at least for the short term.

This downwards breakout was predicted by strongest volume during the consolidation being a downwards day.

This volume analysis technique looks at the presence or absence of support from volume on the breakout after a consolidation period to tells us how reliable the breakout may be.

Published @ 12:17 a.m. EST on 12th August, 2017.

Volume and Breakouts – Is it Necessary? | 9th August, 2017

After a consolidation price will break out. The presence or absence of support from volume on the breakout tells us how reliable the breakout may be.

Gold Daily 2017
Click chart to enlarge.

Pennant patterns are one of the most reliable continuation patterns. But in an upwards trend the breakout should have support from volume.

For price to keep rising it requires increased activity of buyers. Upwards breakouts that do not have support from volume are suspicious.

This upwards breakout comes on a day with slightly higher volume, but the balance of volume for the session is downwards. Stronger volume during the session supported downwards movement, not upwards.

The breakout is suspicious and may turn out to be false.

While volume is important for upwards breakouts, it is not so important for downwards breakouts. The market may fall of its own weight.

Published @ 04:47 p.m. EST.

Non Farm Payroll – What Direction for the S&P500? | 3rd August, 2017

A simple classic technical analysis pattern may answer the question of what direction to expect tomorrow from the S&P500 upon release of Non Farm Payroll data. This release is expected to move markets strongly:.

Gold Daily 2017
Click chart to enlarge.

Pennants are reliable continuation patterns. The pattern is supported if volume declines as the pattern forms. Pennants normally appear about halfway within a trend.

The measured rule takes the flag pole which precedes the pattern and adds that length to the expected breakout of the pattern.

If this pattern is correct, then tomorrow may see an upwards breakout to new all time highs for the S&P500.

Published @ 06:28 a.m. EST.

3 Simple Trend Line Rules | 27th July, 2017

Trend lines used for support and resistance may have varying degrees of technical significance. Here are three simple rules to use to determine how much significance a trend line has and how much attention to pay to a breach.

Gold Daily 2017
Click chart to enlarge.

The stronger the line, the more important the breach.

Thus a line which is close to horizontal, very often tested, and very long held would be the most significant.

A line which is steep, only tested a very few times, and not long held offers very little technical significance.

On the monthly S&P500 chart, the green line has more technical significance than each of the yellow lines. The green line has a more shallow slope and is much longer held, although it has only been tested three times.

This analysis is published @ 05:08 a.m. EST.

US Oil Elliott Wave Technical Analysis – 27th August, 2013

Movement above 110.56 has invalidated the main monthly wave count and confirmed the alternate. This upwards movement is not yet over.

Click on the charts below to enlarge.

US Oil monthly 2013

Movement above 110.56 has confirmed this wave count.

Cycle wave b is not over and is completing a double zigzag, with primary wave X within it a contracting triangle.

I have adjusted the wave count within the triangle of primary wave X. It now fits nicely within the triangle trend lines and has a more typical look. Intermediate wave (E) undershoots the A-C trend line.

Extend the triangle trend lines outwards. The point in time at which they cross over may see a trend change, this may be where primary wave Y ends.

We should expect a continuation of upwards movement from oil for some weeks yet. There is not normally a Fibonacci ratio between subwaves W and Y within doubles.

Cycle wave b may not move beyond the start of cycle wave a. This wave count is invalidated with movement above 146.73.

US Oil daily 2013

Within cycle wave Y intermediate wave (A) is a completed five wave impulse, intermediate wave (B) is a completed regular flat correction, and intermediate wave (C) is an incomplete impulse.

At 122.55 intermediate wave (C) would reach 2.618 the length of intermediate wave (A). At 120.84 minor wave 5 would reach 2.618 the length of minor wave 1.

Minor wave 3 is 0.95 longer than 1.618 the length of minor wave 1.

The structure within minor wave 5 is incomplete. It requires further upwards movement.

US Oil hourly 2013

Within minute wave iii the structure is incomplete. The middle of the third wave is nearing its end. Minuette wave (iii) is so far 0.17 longer than 1.618 the length of minuette wave (i). It may not be over there though. It should be over soon, and when it is minuette wave (iv) should move price lower in very choppy overlapping movement.

Minuette wave (ii) was a relatively shallow 47% zigzag correction. Given the guideline of alternation we may expect minuette wave (iv) to be relatively deep. Minuette wave (iv) is likely to end within the price range of the fourth wave of one lesser degree, between 109.32 and 108.64.

When it is complete the upwards trend should resume.

At 119.03 minute wave iii would reach 2.618 the length of minute wave i.

If minuette wave (iii) moves higher then redraw the channel. Draw the first trend line from the highs of minuette waves (i) to (iii), then place a parallel copy upon the low of minuette wave (ii). Expect minuette wave (iv) may find support at the lower edge of this channel.

Minuette wave (iv) may not move into minuette wave (i) price territory. This wave count is invalidated with movement below 107.35.