Today Reminds me of August 3 2011

On August 3 2011 there was a hammer reversal at a support zone and it turned me bullish for the short term at that time.  The next day the market opened and it COLLAPSED.

That small hammer candlestick was completely ignored.  In fact in hindsight one can clearly see that the hammer was not really a true hammer in that it did not have a very long bottoming tail.

Today’s hammer reversal also did not have a long bottoming tail but we will have to see if it leads to a drop like it did the day after August 3, 2011.  I am a bit skeptical it can happen again given how many head games the market is currently playing.

The more the market drifts around, the closer we get to the Fed meeting next week.  So the risk here is that this whipsaw action keeps dragging on until next week which will be very frustrating.

I thought the market would plunge into the Fed meeting but it could be that we drift or rally into the Fed meeting.

We are at the juncture now where I would really like to see some downside resolution out of the current pattern,  but we keep hanging on by a thread.

sp50020110912

This market is extremely devious right now and does not want to show its true hand.  The shorts are scared the market will blast higher and the bulls are scared it will blow them away to the downside.

The LONGER we go sideways, the bigger the move we are going to get.

It is still true that we fully engulfed the maribuzu candlestick of several days ago.  So the question now is will we get a real move with conviction through this false hammer candlestick.

These small hammer candlesticks can be very dangerous!

Personally I do not believe today’s hammer candlestick reversal and think we get a repeat of August 3, 2011.

But if we close above today’s hammer tomorrow then it could be trouble in paradise for the bears…

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3 comments on “Today Reminds me of August 3 2011
  1. Tom says:

    Forgot to mention the bullish percent index.

    http://stockcharts.com/h-sc/ui?s=$BPSPX&p=D&yr=0&mn=6&dy=0&id=p52589698444

    Looks quite bearish to me.

    The other summation index also looks bearish. The internals of the market are not looking so hot. If the internals stay weak then this titanic of a ship could start to gain more momentum to the downside.

    It is a slow process at first until it gains momentum..

    but would like to see hard down tomorrow.. tough call here.

  2. RMT says:

    This market is going down; its only a matter of when. We could rally another couple hundred points and I would still have my bearish views. Frankly, I’d like to see a rally so that I can get in a better short. I thought today was a breakdown candle but the powers that be came in and saved this market. I think you made a good point in your previous post about the market trying to sucker in as many people as people as possible before plunging lower. I think that’s exactly whats happening with these higher lows that we’ve been having. Even CNBC had an article about a possible “bear flag” and how we needed to stay above the rising trendline on the bear flag…Even a few days ago some guys were saying how the markets had made its lows for the year. The only thing that I could change my mind is if the Fed comes out with another round of QE that just blows everyone’s expectations. But if we chop around into the fed meeting and theres no QE or no hints of QE, then this market would have the perfect catalyst for another leg down. generally, options ex week is very volatile and its difficult to get a good grasp of market direction. If nothing crazy comes out of Europe, I expect a little more upside during the week. But I think this market is going down to test last years lows and i’ll look to pick up some sds very soon

  3. Tom says:

    Agreed RMT.

    The early August down draft saw some huge persistent maribuzu candlesticks. I think we will see a cluster of them again and they might even be larger in size…

    This daily noise and rallies with CNBC headlines are frustrating and distracting.

    Having said that we are at a critical juncture. The daily MACD wants to curl down soon.

    I don’t know if the FED follows technical analysis but they had better do something to stop the daily MACD from curling down again.

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