Hi RS, thanks for stoppin' by. For the downward move to have been convincing from the H&S standpoint, it would have had to CLOSE in the lower part of the day's range.
The move from open to low was convincing in conjunction with the prior days, but the intraday reversal (which was impressive) casts doubt on whether the H&S will complete without first retesting the strength of demand.
The intraday reversal alone certainly doesn't signal a new upward move. We still closed slightly down for the day. But we did form a hammer line.
However, I've found Friday hammers are the least reliable. That may sound silly, but they stood out from all other days of the week in their lack of reliability (I base a successful hammer on a close 4 days later that is at least 6% above the close of the hammer day, but that's for individual stocks. 4% might be a better measure for indexes).
Two full days of "attitude adjusting" would seem to be a contributing reason for their lack of reliability. Also, the particular hammer PATTERN conditions I look for (the hammer day plus the prior days since the pivot, plus the conditions leading to the pivot) isn't met with Friday's hammer pattern.
When we only have 2 down days from the pivot, leading into the hammer, I don't put that into the category of high probability hammers that I like to bet on reversal-wise. I've found that as a general rule, selling climax-type volume is necessary (which we didn't have) for a 2-day decline into the hammer to successfully reverse.
When the pattern has at least 4 but no more than 10 days since the pivot, as well as a bunch of other secondary conditions, I haven't found that it is necessary to have high volume on the hammer day (but we didn't have that either).
The scenario I'm planning my trades for next week by is a rally back to just short of the high of the last pivot day (around the 1780 area), reversing the prior 2 closes. Then I'm assuming supply will take control again and force us back down to play this whole game again.
As always, things never go exactly as planned, so you have to have a "plan B" ready to act on when the primary plan doesn't materialize. But you also have to have a primary plan to base your initial positions by, so that's my primary plan.
I should say that I won't take my cash position below 70% until I see a confirmed trend (which we're no where near in either direction), so you could say that these positions I'm taking are with about 20-30% confidence. Anyone who claims to be much more confident than that for next week's move is either kidding themself, or they bugged Alan Greenspan's house.
dh
|
