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The Most Bearish Monthly Hanging Man Candlestick in 41 Years on sp500

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Sometimes you have to stare at your price charts a little bit longer to understand the real potential magnitude of what you are dealing with.  Sometimes hidden clues in the charts only make themselves known until extensive contemplation and study.

BestOnlineTrades continues to push the limits of proper interpretation of these markets and we continue to focus on interpreting price action across multiple time frames.  Only those who are able to interpret the price action properly across multiple time frames stand the best chance at understanding future market direction.

I was recently reviewing the monthly candlestick chart on the sp500 and it seems pretty clear to me now that the March 2011 monthly price candlestick is ‘potentially’ the most bearish monthly hanging man candlestick we have seen since in 41 years on the sp500.  My chart data on the sp500 only goes back 41 years, so there could be a monthly hanging man that looks just as bearish as the March 2011 candle, but at least going back to 1970 I have not seen any with as much bearish potential as this one.  In other words I have not seen in 41 years a monthly hanging man with such a LONG bottoming tail and a clean body with almost no top candle wick on it.

This monthly March 2011 hanging man candlestick is potentially very bearish because it has all of the perfect elements that make for a potent hanging man candle.

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Bearish Weekly Trend on sp500 May Start to Gain Momentum Again

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I think evidence is starting to pile up that the weekly sell signal given in early March 2011 is now starting to re establish itself.  There is a confirmed weekly MACD sell signal based on the MACD weekly histogram today, but we are only two days into the week.  This signal can still reverse itself during the next 3 trading days.  If it does not then of course the weekly confirmed sell will remain intact.

The downside volume in the SPY was actually quite average today and I am not quite sure whether to interpret this as complacency or a sign of a weak bearish attempt.

The advance since the 3/16/2011 high volume swing low appears to be a rising wedge formation that has pressed back up to the old highs.  Up at the old highs we recently saw several doji candlesticks which marked an indecision point.  Now the market has turned down again, although not to an extreme. 

sp50020110412

Looking at the weekly chart we can see that the weekly up trend was broken with high volume at (1).  Then we had the two to three week upwards rally back under the up trend line to (2) forming several daily doji candlesticks.  But now so far this week we are retracing down a bit and today we touched the top of this large declining channel.

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sp500 Flirting with Broadening Wedge

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The sp500 is drifting slightly down to sideways and is again flirting with the boundary line of the large broadening wedge formation.  We did not close below the broadening wedge line today but came pretty close.

A close under 1323 this week will confirm a weekly bearish MACD histogram signal and I really do not know if that will happen this week.  But I will say that if we close down hard tomorrow that likelihood will start to become more probable.

This is a tough area of the market.  A big move up tomorrow would ‘save’ the market to a certain degree and keep it trending within this broadening wedge.

I think it good to keep open minded about the possibility that we are trading range bound now between 1340 and 1250.

If the current consolidation fails and starts to break down tomorrow it could be that we are going to make another move towards 1250.

The March 16, 2011 SPY volume was 470 million shares, a very high spike volume number showing heavy price action, participation and capitulation.

The rally since that swing low has drifted back up to the highs and seems to be struggling.  It would not be so uncommon for a retest of this high volume swing low on March 16, 2011, assuming we fail to push higher anymore on the current mini consolidation.

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How to Trade One Thousand Dollars into One Million Dollars

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The answer to this key question, “How to trade one thousand dollars into one million dollars” is very interesting to me and I have been thinking about this a lot lately.

Now you might be wondering why I am choosing the 1000 dollar level as the starting level for such a question.  The answer is simply because it is a nice even round number and it is reasonably ‘low’ and also somewhere close to what initial minimum deposits are at several popular brokerage houses.

What got me first interested in this question were those ads for Forex Trading where they offered starting accounts at only 250 to 300 dollars and then promised the ability of high leverage.  After seeing those adds, it occurred to me how great it would be if someone could start with 300 dollars in a forex account and then trade it into very large amounts.  It seems like an impossible feat, especially with the complications of leverage in forex.

But a starting brokerage account of 500 to 1000 dollars is quite common these days.  We see ETRADE showing commercials with a baby and a kitten trying to woo new trading customers.  It would seem that a TV ad showing a baby and a kitten is targeting a more general widespread audience.

So there are likely millions of trading accounts out there that are starting at these minimums.   But even if they are not starting out with a 500 or 1000 dollar minimum, most people can usually scrape 500 to 1000 dollars somehow.  A lot of people at all income levels still somehow manage to spend 1500 per year for an iphone or a $1000 60” HD TV.

So Why Not Set Aside $500 to $1000 into a Brokerage Account with the Intention of Trading it Into 1 Million Dollars ?

It seems like an enticing goal.

But is it possible?

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SLV ETF Continues to Power Higher along with Gold

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Both silver and gold continue to blast higher.  I think it is an important point to observe that gold and silver are pushing major new highs while the stock market seems to be drifting a bit.  For the first time in a long time I am maybe starting to wonder if we will see them decouple here.  In other words, see gold and silver start to feed off of paper equity market weakness.

I wrote about the SLV trading in an expanding wedge formation and a low volume retest situation near the 36 range.  This has since led to a huge upside move.  Initially I talked about how SLV could hit the 40 to 42 range.  It could be that there is room up to the 45 range now.  The SLV is currently trading very strong in the RSI power zone and I suspect will continue to do so for a bit longer.

The metals really are the real bull market and this fact is likely to remain true for many years.

slv20110408

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Tricky Analysis Currently in the sp500

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I have to say that currently the analysis of the future direction of the sp500 is quite ‘tricky’.  I am thinking that I can make equal arguments for the short term bull or bear case.

There are several reasons for this.  One reason is that currently the weekly MACD on the market is on a sell signal and I have been waiting for the market to provide a northward confirmation of the weekly MACD histogram buy signal.  We did not get any confirmation this week.

Instead, on the weekly chart of the sp500 we now have a potential bearish triple M on the weekly MACD histogram which is unconfirmed.  This means that the bearish weekly potential trend could be re confirmed on a weekly close below 1333 on the sp500.

There is also the issue of the overhanging supply from the 2/28/2011 top.  It is unknown at this time how much supply still has to be worked off of this level.  We are seeing the sp500 trade in dojis and then some selling today to work off of this supply, but it is a tough call to say that we are finished working it off, we may not be.  The NYSE summation index seems to be at a resistance zone and may start to stall here.

You remember that expanding broadening wedge formation in the sp500 ? 

As it turns out, we have currently climbed right back into that large broadening wedge formation…

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TSLA Tesla Motors Looks Great

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Today I sent out a notification email to BestOnlineTrades Letter Subscribers about TSLA.  This stock looks quite good to me right now, and may be timely on both the daily and weekly time frames.  I think TSLA could evolve into a great swing trade.

Before I even get into the brief technical discussion, it seems to me that a pure play electric car company has some huge advantages the next year or two.  Yes, the other auto markers are all working on electric vehicles as well, but TSLA is a pure player in this space.

If oil sky rockets to 200 dollars a barrel ( I believe it eventually will but may take 1 to 3 years) the demand benefits to TSLA could be huge and if they are able to ramp up production to a high enough level economies of scale would kick allowing them to offer more price competitive cars.   But this auto maker seems positioned as a niche player in the high end space.  And it seems to me that everyone would like to avoid filling up at the pump, no matter what ‘class’ they belong to.

Porsche has a market cap of 80+ billion and TSLA has a market cap in the 2.6 billion range.  Seems to me like there is a lot of potential upside for this niche electric auto company especially if the oil price gets out of control. 

tsla20110407

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