Morning Report – March 4th, 2014

Yesterday I mentioned that it was not a good idea to chase the market lower at the open, and this morning you can see why.  Surprise news events rarely affect markets over the long term, especially in a strong bull market which was showing few signs of rolling over.  Anyone who established short index positions at the open yesterday, and is still holding is in a losing position this morning.

The NASDAQ Composite candle that formed yesterday is a very bullish candle, and showed that buyers are waiting to absorb any selling. The day was a test for supply, and by the end of the day, the candle shows that supply was being absorbed by demand with the NASDAQ Composite closing at 84.61% of its daily range.  When analyzing a chart I always look to the left to find support or resistance, and look for strength or weakness in the background.

Candlesticks provide a tremendous amount of information about the psychology of the market, and we can clearly see the strong hands are willing to absorb the selling. Does this mean stocks are moving out to a new high from here?  Not necessarily.  If a negative candle like an Shooting Star is formed in the major indexes today, it would indicate distribution.  A bar chart showing a similar formation is an upthrust, until we see a lower high and lower low, the trends all remain up.  Yesterday’s low in the Composite will have to be taken out at the close for a lower high and lower low to be established. Read Full Report