The Dow Industrials- Hourly Chart
I have simplified the reversal process into three easy steps. Now before I go in to explaining exactly how to identify a reversal, one must have the ability to recognize early warning clues that lead up to such an event. Some examples include- Stocks above their 50 day MA in overbought territory, Divergence in momentum and swing indicators, exhaustion in the current trend, and Topping price patterns. There are many others, but these set of examples should lead you in the right direction.
To simplify matters even more, I will use The Dow Industrials. In the chart above, I have drawn a rising wedge pattern to outline the containment of price. A break out of this particular pattern does not necessarily suggest the trend is broken, but do take heed to the lengthy duration of this current uptrend. Following the "Break" , the next step is a backtest of the same trendline. During the backtest phase, prices rally back up to the broken trendline where they now find resistance. This same level will produce a lower high and a fairly good entry point for a short postion. Finally, the resumption of the trend gives meaning to the newly defined downtrend. It clarifies the price structure by revealing a series of lower highs and lower lows.
The Russell- Daily Chart
The Russell produced its own reversal around the same time as the Dow Transportation Average. The trendline break in the daily time frame is confirming the reversal that transpired on the Hourly chart. The Basic idea is that price is conveying weakness that can be seen in a higher time frame. I should also mention that the higher time frame dictates the direction of the trend.
The U.S. Dollar- Weekly Chart
The Dollar is now showing strength on the weekly chart. This certainly will generate selling pressure in the equities markets.
The VIX- 4 Hour Chart
The VIX is now confirming several sell signals for the Market Averages.Folks, If it's not clear to you, then let me say it like this- WE NOW HAVE A REVERSAL IN ALL MARKETS!
Good Luck with your Trading,
Darah
Hey! This is a nice clean looking blog. Well done Darah!
ReplyDeleteNot to mention that I'm liking the charts you're putting together here. In fact, I'm going to add you to my fairly restricted blogroll and I'm pretty picky about that, lol. Correction... I just did it!
Would you please do me a favor? Your blog and mine are approximately the same age... infants, but I'm kind of curious about your chatroom. Would you consider it more of a blessing or a nuisance? And most importantly, can you please tell me if you're aware of the control you have over who can comment and who can't... if any such control exists at all? There are a few trolls in the world and if they can't be controlled I wouldn't install it. Please let me know?
And congrats again. I like the look of your house. And I like what you're looking at.
All the best, AR.
Hey albert,
ReplyDeleteFirst and foremost- thanks for joining the site! To your question, I like the chat room because it gives a chance for others to collaborate. I hope that others will use it for that purpose throughout the day. Yes, you can control the comments made by others. Fortunately, everyone on this site is very respectful to me and one another.
Good luck and welcome aboard,
Darah
Thanks for the feedback, it was very valuable. Unfortunately for me, I'm rather high profile on a few blogs and as a result I'm sometimes attacked mindlessly. The damage those basta... morons can cause can be quite severe if the owner of that particular blog doesn't correct the Disqus spam filters by informing them that the innocent comments which were flagged are indeed 'innocent'. Therefore on my own blog I have zero tolerance for those who's goal it is to destroy a site. I am so happy to hear that you don't have that problem. I promise to hug you every day as well, unless you're a male in which case a high five will have to do.
DeleteBelieve it or not, I began studying stock market analysis when I was 11. I hate to tell you how many years ago that was but suffice it to say that at the time color television was still a thing of the future, lol.
So if you're interested in seeing some of the types of analysis I do please feel free to drop in and say hello. Thanks again for the feedback on your little chatter box... I've never seen that one before.
Continued success!
AR
Dara how long will this decline last and how low will the s&p go
ReplyDeleteHey WTF,
ReplyDeleteIt can very difficult to know exactly when the market will seek out its next major bottom. I will guide you on the blog with my daily posts for that. I can tell you that we will eventually break the October lows and bottom around the 890-950 level for the SPX. Then at that time- It will be a great buying opportunity.