Stock Market Trend Reversal Doji Pattern?

By: Jay_DeVincentis

Reversal

The market formed a doji.

Stock Barometer Analysis

The barometer remains in Buy Mode.

In my stock trading 101 classes, I talk about that day where you leave in the morning, everything looks bullish, futures are cranking, the market is up in the morning and you return home and the market closes relatively flat. This was one of those days. In Japanese terms, the market formed a Doji - which is simply a balancing of the bullish and bearish energy. When it happens on a key reversal day, I tend to pay more close attention. Caution is key...

Money Management & Stops

To trade this system, there are a few things you need to know and address to control your risk:
This system targets intermediate term moves, of which even in the best years, there are usually only up to 7 profitable intermediate term moves. The rest of the year will be consolidating moves where this system will experience small losses and gains that offset each other.
This system will usually result in losing trades more than 50% of the time, even in our best years. The key is being positioned properly for longer term moves when they come.
Therefore it is vitally important that you apply some form of money management to protect your capital.
Trading a leveraged index fund will result in more risk, since you cannot set stops and you cannot get out intraday.
Accordingly;
Make sure you set your stops so that you can lose no more than 2% per trade (based on the QQQQ if you're trading leveraged funds and options with our trading service).


Potential Cycle Reversal Dates

2010 Potential Reversal Dates: 1/19, 1/28, 3/2, 3/23. We publish dates up to 2 months in advance.

With the push higher into 3/2, it looks like we’re working towards a top. The next thing we need to consider is if the market will grind higher into 3/23 or pull back - I’m leaning towards a grind higher - but today’s action has me cautious.

2009 Published Reversal Dates: 1/20, 2/11, 3/7, 3/15, 4/8, 4/16, 4/27, 5/7, 6/8, 7/2, 7/17, 9/14, 10/10, 10/24, 11/12, 11/30, 12/9, 12/21, 12/29. 2008 Potential Reversal Dates: 12/31, 1/11, 2/1, 2/13, 3/6, 4/5, 4/22, 5/23, 6/6, 6/27, 7/13, 9/2, 10/3, 10/22, 11/10, 12/11. 2007 Potential Reversal Dates: 1/10, 1/14, 1/27, 1/31, 2/3, 2/17, 3/10, 3/24, 4/21, 5/6, 6/15, 8/29, 10/19, 11/29, 12/13, 12/23, 12/31, 1/11/08. 2006 potential reversal dates: 1/16, 1/30, 2/25, 3/19, 4/8, 5/8, 5/19, 6/6(20), 7/24, 8/20, 8/29, 9/15, 10/11, 11/28. 2005 Potential reversal dates: 12/27, 1/25, 2/16, 3/4, 3/14, 3/29, 4/5, 4/19, 5/2, 6/3, 6/10, 7/13, 7/28, 8/12, 8/30-31, 9/22, 10/4, 11/15, 11/20, 12/16.

Spread Indicators

Use the following spread/momentum indicators to assist in your trading of the QQQQ, GLD, USD, USO and TLT. They are tuned to deliver signals in line with the Stock Barometer and we use them only in determining our overall outlook for the market and for pinpointing market reversals. The level, direction, and position to the zero line are keys in these indicators. For example, direction determines mode and a buy signal 'above zero' is more bullish than a buy signal 'below zero'.

QQQQ Spread Indicator (NASDAQ:QQQQ)



The QQQQ Spread Indicator will yield its own buy and sell signals that may be different from the Stock Barometer. It's meant to give us an idea of the next turn in the market.

Gold Spread Indicator (AMEX:GLD)



Want to trade Gold? Use our signals with the Gold ETF AMEX:GLD. Gold gives us a general gage to the overall health of the US Economy and the markets.

US Dollar Index Spread Indicator (INDEX:DXY)



Want to trade the US Dollar? Use our signals with the Power Shares AMEX:UUP: US Dollar Index Bullish Fund and AMEX:UDN: US Dollar Index Bearish Fund.

Bonds Spread Indicator (AMEX:TLT)



Want to trade Bonds? Use our signals with Lehman’s 20 year ETF AMEX:TLT. The direction of bonds has an impact on the stock market. Normally, as bonds go down, stocks will go up and as bonds go up, stocks will go down.

OIL Spread Indicator (AMEX:USO)



Want to trade OIL? Use our signals with AMEX:USO, the OIL ETF. We look at the price of oil as its level and direction has an impact on the stock market.

Supporting Secondary Indicator



We daily monitor hundreds of popular and proprietary technical indicators that break down market internals, sentiment and money flow to give us unique insight into the market. We feature at least one here each day in support of our current outlook.

Summary of Daily Outlook
We remain in Buy Mode, looking for the market to move higher into 3/2, which it did (and showed a reversal candle).

That has me flashing a little caution here. But based on the above EIOVR, we do have room to go higher.

The iibbr above is moving higher off a relative low, and this is bullish. This suggests we have energy to push higher.

Combine that with the level of put buying and the lack of equity call buying suggests even further energy to rally. Things can change in a few days, so stay tuned...

I am still bullish on oil (which is up overnight) and believe the dollar will get weaker soon (although it’s bouncing in early morning trade).

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As always, if you have any questions or comments, feel free to email me here at jay@stockbarometer.com.

Regards,

By Jay DeVincentis

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