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Stock Market Doji's At The Top Of The Wedges.....

Stock-Markets / Stock Index Trading Mar 03, 2010 - 01:02 AM GMT

By: Jack_Steiman

Stock-Markets

Today we saw most of the major index charts hit the top of their wedges with doji candle sticks meaning the sellers caught up to the buyers at this major resistance area. The top of the wedge is key resistance the bears want to make sure doesn't get taken out and when you get doji's at critical resistance, this usually means some type of pullback is upon us. It doesn't mean the selling is going to be intense. In fact, my guess is that there won't be too much selling at all but you have to be prepared for some. It also tells you that you need to be patient with new plays. Lots of plays will set up but they need unwinding to do so.


The doji's, not coincidentally, took place when the short-term charts got overbought. Typical market behavior. The short-term is likely to be very choppy and this always tells me not to get too aggressive until we do get that unwinding so please keep that in mind for the next few days. Again, it shouldn't be bad but selling is selling no matter how small it may end up being. Why bother stocks or ETF's with stochastics in the 90's and RSI's near 70 on the sixty minute charts when you can get them with stochastics and RSI's more mid level meaning 50's on both if not a drop lower. Safer and gives you more upside action.

The market started with a gap up today but I pointed out that we would be overbought once that gap up took place. The market spent the rest of the day trading mostly lateral as the overbought wouldn't allow for further upside but buyers kept trying to buy any selling that took place. It ended with a bit more selling and took markets back down near or below their opening gap up levels. A tired market to be sure. Nothing bearish but near-term neutral to lower can be expected with the way we closed. The volume was pretty strong as well and this tells me that the bears really came in hard late to keep the buyers at bay.

Tonight there are many charts provided where you can view just how many different area of the market hit the top of their wedges with those doji's. However, it's important to study these charts and notice how the bigger picture remains quite bullish in nature. These charts simply need to put in handles which will allow for the unwinding they all need. Once this takes place, and it shouldn't take very long at all, the market should be able to continue its journey northward which would also mean a breakout over the wedge tops. Never a guarantee, of course, that things will work out this way but the set up is there for sure. The MACD's were impulsive on this latest move up in price meaning they confirmed that price move higher. Patience will be a true virtue here as this set up takes place. If the MACD is reflexive meaning it doesn't move down with price, things will really be set up for another move higher. I'll be on top of that.

There are so many charts setting up here should things play out as I expect them to. It'll be more than interesting to see if all of them hold their patterns together. If they do, this is another positive for the bulls medium-term. One step at a time but I suggest once again you exercise some patience for the very short-term.

Peace

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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