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January 3rd Market Wrap-Up

Candlestick signals and patterns can confirm or deny truisms of market advice. One truism is watching how markets move in the first five days of trading of a new year, indicating whether January is going to be overall bullish as well as carrying through the first quarter. Bearish trading in the first part of January usually indicates January is going to be a down month. Utilizing the information built the candlestick signals allows the candlestick investor to confirm which direction a price trend will probably move. Unfortunately, the lack of any movement creates a different scenario, yesterday's positive trading, followed by today's bearish trading does not produce any verifiable trend movement. This is also valuable information. The purpose of candlestick analysis is to allow us to identify what is occurring in investor sentiment, accurately analyzing price trend movements. Candlestick analysis also reveals when there is no compelling investor sentiment, bullish or bearish. This is valuable in the sense that if you do not have any probabilities that you can invest, sit in cash, be patient, and wait for investor sentiment to show which direction they will be moving. Simple candlestick scanning techniques identify which sectors will be producing high probability trades even though the overall market direction can't be analyzed. Gold prices continue to move slowly to the upside, making positions in the gold sector profitable even when the market is not producing any major trend.

The T-line becomes a strong pattern and trend indicator. Today's bearish trading reveal the T-line was acting as resistance. This makes the analysis of what type of candlestick pattern may be produced. A lower open, continuing the downtrend, would indicate a bearish J-hook pattern is in progress. This would imply another wave to the downside. Short positions could be established with confidence. Positive trading, or indecisive trading, at the T-line area would make for the prospect of a bullish J-hook pattern. What do you do now? Nothing! More indication of investor sentiment is required. There is nothing wrong with sitting on the sidelines for a few days until a high probability pattern can be identified. Investors do not need to be investing every single day. It is much better to establish trades when there is a high probability analysis available. What will the markets do this year? No idea! And if you listen to any of the talking heads, keep in mind, they have no earthly idea what the markets are going to do this year. Let the candlestick charts tell you what the market is doing.

Good Investing,

The Candlestick Forum Team

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