padedayo

Market Analysis - 11th October 2018

Short
DJ:DJI   Dow Jones Industrial Average Index
831 points down on 10/10/2018 what a bearish day but basically September – November months are volatile times of the year. From my previous update the idea for a bearish move was floated that the candlestick pattern last week especially with the long upper shadow and the evening star reversal afterward. We had buying pressure but it all gave out there was no buying pressure yesterday after the market closed.

Futures are also down 269 points and with this indication if the opens on Thursday it is likely to open at 25250.

Market Expectations
Let go back to February 2018, look at the big candlestick , the gap down followed by a huge candlestick next day and a huge bullish candle afterwards. This may be the model in play this very time but I cannot confirm it just a trader’s hunch. See the rally in January 2018 to all time high of 26500, the freaking gap down and a big bearish 500 point trading session followed by a gap down opening at 25347 just like we are seeing now to close at 24345 almost a 1000points on 5th February 2018. Following this 5th February session was a bullish candle, a Doji and a bearish candle and then the buying demand kicks in when you see the lower shadow.

My hunch is that Thursday is going to be bearish but there are alternatives.

Idea here is there will be a gap down with a bearish trade down to support levels 24,800. There are 3 primary pivot areas at 24,800, 24,500 and 24,000. It is scary but looking at February 2018 this could be the model of fizzles and rallies. Note that since July 2018 we have had a 2500 points move in the DOW JONES suggesting it is over bought.

Few months into the future we will look back and see the strong support at 24,000 and resistance at 26500. At this point in time I cannot with specificity state any fundamental reason for this move, I think the market is overbought and traders are taking profit so as not to get caught like the February 2018 move.
My hunch is the general sentiment is bearish and this may continue today but you may see an engulfing candlestick bullish because of the market volatility . It is scary but in hindsight it won’t be.

However, If we however a bullish Thursday then Friday will be a continuation to the downside as the bearish move is not completed.

The oscillators depict a downside potential.
Stochastic is downside with 47.57 and 62.95 we need to get to around 20.
RSI is oversold and MACD is currently crossing down.
The Bollinger band is a bearish breakdown.