(Click On Charts To Enlarge)
There was a small gap in the daily chart between the 1679.19 Nov. 5 close and the 1676.92 Nov 6. high. Yesterday's open was 1680.67, which filled that gap entirely.
Partial fills, or even a complete fill of an opening gap like we had yesterday morning are common, but when the gap is filled and the stock or index continues down like the NASDAQ did yesterday, it's a "Gap To Crap," and a fizzle. The downtrend from the Nov. 4 high of 1785 still is in place.
Intraday, The NASDAQ took out Thursday's low by about a half a point, but it managed to close above it so that could be a little downside fakeout. The session was weak though. I'd want to see yesterday's 1680 "Gap To Crap" high get taken out to the upside.
Chart #2 is the Ichimoku Kinko Hyo chart which is a visual way of looking "at a glance" at the "table of balance." We can "see at a glance" that we're in Bearish territory below the Kumo (Cloud), represented by the vertical lines, and that very short-term, the 8 Day Tenkan-sen and the 21 day Kijun-sen are overhead and slightly inverted at 1694 and 1695, respectively, so that's some additional resistance.
On yesterday's gap up opening, I was looking for a retracement, then a push up through that resistance. That isn't what we got, so I threw in my QLD long position based on the continued late day weakness going into the close. I'd rather "pay up" if resistance gets taken out than risk riding this down, if that's what it's going to do.
10 comments:
Melf,
I really respect what you had to say yesterday on Atilla's blog. This market is so difficult to read that even the "professionals" are all over the place. Ms. Market will not let any one side (bull vs. bear) profit for long before teaching a lesson. Your calm analytical objective manner is really appreciated.
Melf,
Thanks for your posting s and analysis. I'm new to the sophisticated Japanese systems but I find your explanations easy to follow and much appreciated.
haven't seen your analyses before but they are different and interesting. will return for updates. beatiful charts.
This market is so difficult to read that even the "professionals" are all over the place. Ms. Market will not let any one side (bull vs. bear) profit for long before teaching a lesson
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Katzo,
Boy, ain't that the truth!
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Melf,
Thanks for your posting s and analysis. I'm new to the sophisticated Japanese systems but I find your explanations easy to follow and much appreciated.
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Mark,
I'm forever editing my posts because they're so long, but I also don't won't to assume that people understand some of the finer points, so I tend to over-explain. I really appreciate your comment. Thank you.
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haven't seen your analyses before but they are different and interesting. will return for updates. beatiful charts.
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Thank you, ohunt. It feels well worth my time to post those analyses if it's a help to you guys.
Good luck to all of you!
Do you add any weight to the bullish cross of the 8 and 21 day averages?
Thanks for the charts, Melf. I was going to ask you if the ichimoku analysis tools were built into metastock, but decided I was being lazy not to google it. Imagine my surprise (not really) to find the method and formula for constructing an ichimoku chart on the equis website.
Now I've got a new TA tool to play around with. More indicators to overload my brain with, lol.
Melf - the formula I copied from the Equis website worked, but the cloud pattern isn't filled in. I'm wondering if you know where I might find a formula that creates easier to view charts. Thanks.
(Do you add any weight to the bullish cross of the 8 and 21 day averages?)
ohunt,
As with any bullish or bearish cross of moving averages, you can get whipsaws (false signals) and even more so with faster moving averages, like an 8/21 if the chart is in a trading range.
A lot depends on the context in which a cross occurs. For example, in the NASDAQ in February, 2008, there was a bullish cross of the 8/21 after the horrible January smackdown. The index was trading in a triangle, and the Kumo (Cloud) resistance was just overhead.
While the triangle still was in progress, the 8/21 made another bearish cross, then the NASDAQ broke out of the triangle to the UPSIDE near the apex. That usually isn't good, and it wasn't. The breakout lasted for one day, then the NASDAQ tanked 200 points into the March low. YUK.
That 8/21 bullish cross during the triangle was a meaningless whipsaw.
If you'd like, I could post some chart examples of 8/21 crosses in the context of the rest of the Ichimoku chart from the NASDAQ, 2008 since I've already got them annotated. I find visuals a lot easier to understand, which is why I like Ichimoku Kinko Hyo charts ("At a glance...the table of balance").
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(Imagine my surprise (not really) to find the method and formula for constructing an ichimoku chart on the equis website).
gluon,
Oh, great! Good for you, for digging that up!
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(the formula I copied from the Equis website worked, but the cloud pattern isn't filled in.)
gluon,
As long as you've got the parameters of the Kumo (Cloud), which is Senkou Span A and Senkou Span B, you're alright. In fact, the vertical lines that connect the two make the chart a little more difficult to read when the candles are in that area (the Kumo).
(I'm wondering if you know where I might find a formula that creates easier to view charts. Thanks.)
Sorry, I don't, but I'd suggest making the Chikou Span invisible if you've got that option. In theory, if the Chikou Span is trading above price, it's a buy, and vice versa. It doesn't work very well at all, in my opinion.
For the Senkou Spans A & B, is use a 42 day (twice Fibonacci 21) rather than the Metastock suggest default of a 44 day just because I like Fibonacci numbers and feel more comfortable with them. 42 was the closest that I could come to being reasonably close the suggested default ;)
Thanks for the advice, Melf. I'll change that setting you recommended and maybe do some more tinkering when I get used to using it. In fact, I wouldn't be surprised if I could find others who have already done some tinkering and posted their formulas somewhere on the net.
If I stumble upon settings that seem to work even better, I'll let you know.
Hi Melf,
I am trying to understand the basics of charting. In the vphm, why isn't the bottom red line adjusted to the lows on the far right therefore making it either a wider triangle of even a parallel? I understand touch points one and three form this trend line but wouldn't that last lower right point readjust it?
Thanks.
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