October 6 Market Wrap-Up
The markets traded indecisively in today's trading, forming Doji/hammer signals, in the indecisive trading range of the past four weeks. There is a wedge formation being formed in the Dow and S&P 500, possibly producing a breakout one way or the other. But until evidence of excessive bullishness or excessive bearishness breaching either side of this wedge formation, assume the indecisive trading remains in progress.
These market conditions require closing out positions very quickly if they are not performing correctly. The indecisive nature of the general market should not be influencing a stock price trend if it is acting strong on its own accord. Knowing that the market movement is definitely sideways allows candlestick investors to make appropriate decisions about how positions should be allocated in a portfolio. Because of the lack of conviction, either to the bullish side or the bearish side, the time frame for holding positions should be dramatically reduced. The graphics of candlestick charts allows for a much more accurate assessment of what is occurring in investor sentiment. When investor sentiment reveals that it is indecisive for a significant length of time, holding long positions or short positions require much more diligence for identifying when a force of the trend diminishes.
The best safety factor for an indecisive market is utilizing the signals and chart patterns that reveal the strongest trend analysis. Once a signal or pattern is confirmed, the use of the T-line becomes that much more critical. Specific sectors will buck the trend of indecisiveness based upon outside influences. For example, the oil stocks sector has picked up strength based upon Saudi Arabia's indication they will start cutting production. This has added strength to oil prices, which add strength to the stocks sector. Utilizing the candlestick charts allows investors to identify which stocks in a particular sector will be acting the strongest.
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