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Hello Fellow Chart Watchers! It appears that the next "down-leg" for the markets has started in earnest. As our Major Markets CandleGlance page shows, Friday's poor results left most of the major averages at or below their short-term support levels and their 50-day moving averages. And our Bullish Percent CandleGlance page appears to confirm that this is not a fluke as all of the BPI's that we track are heading lower right now. The final "nail in the coffin" can be found on our Market Internals page where almost everything looks very bearish right now. Friday's Nasdaq action resulted in a chart with something that we get lots of questions about - a hollow red candlestick so this week, I wanted to review the rules we use for drawing and coloring candlesticks and see if they provide any Nasdaq insights right now... As recommended in most candlestick charting references, we draw our candlestick charts with either filled or hollow candles. Only the open and the close ("last") for each time period is used to determine if a candle should be hollow or filled. If the open is higher than the close (i.e., prices declined during market hours) then the candle is filled, otherwise it is left hollow. That means that hollow candles indicate bullish activity, and filled candles indicate bearishness. The rules we use for coloring candlesticks (and the other price styles like OHLC bars) are based on a comparison of the current close to the previous time period's close. If a stock closed higher than yesterday's close (i.e., prices rose during the last 24-hour period) then the candle is colored black, otherwise it is colored red. Black is bullish, red is bearish. Now consider the case where a stock's perceived value changes significantly while the markets are closed - maybe due to a profit warning after the bell. This usually results in the next day's opening price being significantly different from the previous day's closing price - i.e., a "gap up" or a "gap down". Gaps often indicate significant shifts in investor sentiment and prices usually continue moving in the direction of the gap for several time periods. Sometimes however sentiment will reverse itself during the same day as the gap indicating that investors are confused and that the current trend is now in doubt. If such reversals do not completely "fill the gap", then they result in what I like to call "conflicting candlesticks" - ones that are filled bullishly but colored bearishly or vice versa.  
Friday's Nasdaq action resulted in a hollow, red candlestick. Stocks gapped down on the open but managed to recover some (not all) of that loss before the close. While hollow, red candlesticks often occur just before prices rise, the Nasdaq's recent track record for these signals isn't encouraging: |
CONSUMER STAPLES BOUNCE BACK... With the stock market on the weak side, it's not surprising to see consumer staples stage a combeback of sorts. That's why they're called defensive stocks. They do best when the market starts to weaken. The first two charts show a couple in the cosmetic and food groups that turned in strong weeks.   RYDEX URSA FUND HAS GOOD WEEK... A couple of weeks ago we suggested the Rydex Ursa Fund as a possible hedge against a market downturn. The chart below shows that this bear fund was in a deeply oversold conditions (with an RSI at 30) and was in major support around its 200-day average. The fund has jumped to a six-week high and is back over its 50-day moving average. 
Here are some links that should help you get started:
Questions? Comments? Concerns? Problems? Suggestions? Simply 'r'eply to this email message and I'll see what I can do. Take care, ABOUT YOUR SUBSCRIPTION: You are receiving this mailing because your email address was entered into the subscription form on our web site. To unsubscribe, or to switch between our HTML version and the Plain Text version, use the form on our Subscriber page. If you have any problems, simply 'r'eply to this email and I'll try to fix things by hand. |
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