Candles Speak – Daily

Today’s advance in Nasdaq made it look like the whole market is starting another rally. I cautiously agree with NQ and let me explain why “cautiously”.
1. NDX/NQ
As I mentioned in my yesterday’s update, the index needed to close at a new high in order to overcome the bearish shadow from the previous large red candles. It happened and the horizon seems to be clear for the follow up tomorrow and possibly the next few days.
2. SmallCap
The cash index produced 7! consecutive green candles. While this looks very bullish, the Candle theory is extremely cautious about 8-10 candles of the same color in a row, advising that a sharp and, possibly, deep reversal would follow.
3. SPX/ES
The cash index closed above the both previous candles and hints about a possible continued rally. The message would be much stronger if it closed above the high of both prior candles.
4. DJI
The cash index closed with a red Hanging Man and the futures closed with a rather clean Bearish Harami. The odds are definitely on the bears side. The bulls, if they want to take a driver’s seat, would need a great push tomorrow to close over today’s high.

Summary: Cautiously bullish for tomorrow. Perhaps NDX and SmallCap will be rallying to the higher highs, leading everyone else. Watch: If DJI starts to deteriorate, it could be a harbinger for the next move.

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