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October 3 Market Direction

Although the market indexes clearly reveal an indecisive sideways movement, candlestick analysis provides some revealing aspects of human nature that can clearly indicate which direction the market will move from these levels. The Dow and S&P 500 traded in decisively today. This does not show any change of the sideways movement of the market as been illustrated ever since mid July. However, the NASDAQ formed a Doji today, the ultimate indecision signal. It occurred when the NASDAQ has also been moving sideways. Because human nature works the same way time after time, today's Doji in the NASDAQ provide some very informative trend analysis information. Whenever an indecisive trading range ends up with a Doji at the end of the indecisive trading, that sets up a very strong trend analysis indicator. If prices gap up or down on the open in tomorrow's trading, that will indicate a strong move after the sideways motion of the markets. Simply stated, a flat trading range ending with a Doji usually is the setup for a very strong price move.

With the markets moving sideways, obviously there is not going to be any bullish or bearish force contributed from the market itself in individual stock charts. This is an advantage for the candlestick investor. Price patterns have been producing very profitable trade set ups when the market has not shown any directional force. Bullish price pattern breakout's are more likely to occur with excessive profitability when there is no major selling pressure in the market. The same is true for bearish breakdowns in price from candlestick patterns because there is no excessive bullish force in the markets. These market conditions have made frypan bottom patterns, slow curve patterns, and J-hook patterns to work very profitable.



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Good Investing,

The Candlestick Forum Team

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