sp500 Completely Evades Weekly Gravestone Doji

Today the sp500 and all other market indices completely evaded the potential bearish weekly gravestone candlestick that was in force as of yesterday.  The weekly trend continues to be confirmed higher and should remains so for the rest of September and possibly much of October as well.

Today was a very clear signal that this market is in absolutely no mood to be going down severely again any time soon.  We saw a very strong upwards reaction off of new support of the 1120+ range on the sp500 after a breakout several days earlier.

This is a strong tape and today’s action confirms that the path of least resistance is in the northward direction for now.

The market has now set up a bullish triple P pattern on the MACD histogram which would be confirmed with a close above today’s price high.

Even the BKX banking index which I was so concerned about yesterday has now put itself in a position whereby it can trade higher back to the very top of its swing trading range.  It has broken back inside its trading range recently and the recent 3 day decline put it at risk of breaking back under the trading range.  But today instead it bounced right back inside.

I am re instating the BOT long signal as a continuation long signal as of Monday’s AM opening in the sp500.  The fact that the market rejected any ideas of potential downside so strongly is a signal within itself not to go short here.  The tape is saying it wants to move higher.

The action over the last 4 days is classic Wyckoff retest action.  This is exactly what one wants to see after a break of resistance, a retest of support and then a strong reaction higher off of support. Totally classic.

sp50020100924

Ideally the banking stocks would be leading strongly higher but instead they are lagging.  At first appearance this does not appear to be a healthy development at all.  But the tape action on the Sp500 is saying this market wants to go higher and the banking indices are likely to lag the market for a while.

How long that can go on is unknown but for now the trend is your friend so to speak. . .

Posted in Market Timing, SP500
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7 comments on “sp500 Completely Evades Weekly Gravestone Doji
  1. Gooner70 says:

    Tom.

    The pattern over the last 5 days , looks like a picture perfect ‘Rising 3 methods’ candle formation.

    This is a strong Bullish Candle formation.

    (Not easy this is it?)

    Have a good weekend.

    Regards

    Gooner 70

  2. ed says:

    RE: Rising 3 methods candle formation

    Middle Candle Wicks
    “Important to note is that each middle candle wick needs to stay within the first candles high/low range to signal a strong continuation signal. With the bullish Rising Three Methods this is especially important for the lows. If a wick should trade to a low below the first large blue candles low, it casts doubt over the strength of the continued uptrend.”

    Of course we would also like to see higher volume on a breakout like today

    But it does look like a classic “return move” to the neckline on an Inverse H&S before continuing back up. Also a bullish kicking pattern took place in the last two candles

    Seems strange though, that I didn’t hear anybody on CNBC mention the possibility of this being a short covering rally. I know that there had been reports a lot of put options purchased in the Sept and Oct months. Most probably spurred on by Arch Crawford’s predictions of an early September crash

  3. RiceToaster says:

    I’m very skeptical of market going up like this. If it wasn’t for FED doing POMO 3 times last week and more POMO the coming weeks, do you think the market will trend up like this?
    With that said, I will stay either on the sideline or going heavy short once FED prop it past 1150.

  4. JR says:

    Tomorrow will be very revealing. If no exhaustion gap on the $SPX then consider that this market has a way to go before September 30th! And don’t hold you breath for that gap on Monday.
    Remember that the funds, and Monday is their entry day, have a vested interest in an up September. End of quarter results are sent out.
    So we are more likely to see the exhaustion gap on Thursday!
    With only four days to make their portfolio look good, they are really motivted to push the market up and up.
    Their favorite expression “put lipstick on the pig”.
    Look for October to be the “tell” month!

  5. JR says:

    Early Monday AM tape action.
    Greed is Good!
    It is lovely to see how the algorithm boys are trying to suck in just a few more shorts! To fuel their end of month push.
    These guys are good, These guys are very good!

  6. Tom says:

    Thanks for all the interesting comments guys.

    I was not aware of the rising three methods candlestick setup, but indeed that does seem to support the bullish picture. Thanks for pointing that out Gooner.

    -Ed Arch’s subscribers must be feeling a lot of pain. I think Arch was 200% short using full margin as I recall reading in one of his recent letters before September. CNBC always gets it wrong. It is amazing to me though how strong September has been when Sept typically is such a bad month.

    -RiceToaster I hear you, but I would be careful about fighting the tape. As long as we hold above 1120 market may be in a good constructive stance going forward. But maybe 1170 is a decent spot for some type of reactionary pullback since it is quite an important swing point.

    -JR Yea end of quarter window dressing seems to be playing out here. Maybe after Oct starts they get some kind of sell off going. Maybe there will be some type of geo political event in Oct that serves as an excuse to sell off the market. On the other hand the November elections seem to be playing into this advance quite a bit. Washington wants this market to spike higher right into the elections for obvious reasons.

  7. Max says:

    Hey Tom,

    I’m not a technical analysis virtuoso but today’s action is anything but bull market. Bet it’s gonna take much more than speculative short covering to beat today’s peak.

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