Another Market Reversal – What is the [REAL] meaning?

by birtanpublished on August 29, 2020

Hey traders david frost my strategic forecast you're here for another episode of common sense market analysis today is thursday july 30 2020. we're looking at a daily chart of the spy

Or spider which is the proxy for the s p 500 what do we have on the docket today there's a lot of stuff going on we had a nice big gap down this morning we had another one of those by the dip crowd slash

Reversals finishing near the highs of the day we also had some of the big boys reporting earnings after the bell we had facebook amazon google and we might as well look at apple in real time as

They're about to report their numbers i'll just talk while apple's chart is up on the screen and then once they report earnings we'll see it go wild in one direction or the other

Seems like 400 has the writing on the wall it's at 390 right now everything else was up amazon was up a couple hundred bucks or close to it uh facebook is up 20

Bucks google was up a little bit not much after hours there you go 394 395 they'll get it to 400 maybe come up short pull back a little bit or spike it

Through that's generally the way it works and there you have it they're at 398. we're not going to waste a lot of time in this i thought it would be just interesting and there you go so they

Pull it back coming up short you see it's just a rodeo nothing more nothing less here comes 400 there's 400 they printed over 400 and there you have it so let's get back to the daily chart of

The spy we'll take into an account those things happening and let's discuss a what happened today and b what's likely to happen going forward so

First we eyeball the trend the trend is your friend until it's not until the very end today they came back to the 20 period moving average which is also known as home base but they never filled the gap

What's that horizontal line 3 18 92 we should all be familiar with that number they never filled the gap again they've made too many attempts next time they finally come down to do

The gap they're likely not going to stop at the gap now with a clean slate what do we have on the docket for tomorrow tomorrow's friday all the big boys reported regardless of whatever their numbers

Were we don't care what the numbers were what we care about is how the market reacted to whatever they did report so they're all up that means that the nasdaq is up and it is

And also and what you'll find inside the numbers later on when we get to it is we were eyeballing them filling a gap up at 3 25 20. they're actually above that now you can see where they are 326

That's as a result of those companies reporting their numbers and the markets spiking up in the after market or after hour session so what do we say about that they did the thing

After the market closed you can see here in the last post of the day inside the numbers meager attempt at the jam session too early sometimes what they do and what i refer to as a jam session is

When they jam the market up higher into the closing bell today was a good opportunity it would have been a good excuse to go fill the gap what did they do they just waited till

After the close for those companies to report their earnings and then they had the jam session so what do we say here they'll either do it as a result of the big boy earnings releases

Or they'll kill the futures after the close so if they didn't like meaning they the market didn't like what the big boys had to say they would have killed the futures they didn't do that they jammed them

Higher and that's what we have so while we're here we might as well take a look at the pre-market commentary the rest of the commentary throughout the day take a look at stocks on the move

Then we'll get back to the charts the spy and others remember that 90-day cycle thing we talked about last night was pretty interesting when we woke up this morning and

Everything was down or if you're like me and you're up in the middle of the night and everything is down you're kind of scratching your head saying hey it's kind of funny how that works then they had the reversal

Now we're having a jam session in the aftermarket session so the 90 day cycle thing while it may still work out tomorrow unless something crazy happens

Overnight or in the morning tomorrow is poised to be an up day so we'll take a look at the chart again of the spy and we'll talk about some stuff we're not finished over there let's go

Through some of the commentary and then we'll go back so early in the day we had a beat on what was going on we knew where the resistance was we knew where the support was we had an eyeball on that 319 deal we've

Done that before and we'll likely do it again but they still came up short and traded away that's bullish we know how that works but early on the buy-to-dip crowd wasn't

There yet so we have to focus on what was happening inside the numbers early in the day 322 was important you see it here at 9 934

322 was a pivot again if they closed below meaning short-term candles if they get below 322 they're making a b line somewhere where are they going 320. you see it also right up here again at 9

41. moving along a little bit now here's where we're citing the resistance without closing at least some 10 and 15 minute candles above 322 they're going to pay a visit toward the

Big fat round numbers the big fat round numbers are 320 in the sp y and 3200 in the es five minute chart you know the routine right of the vertical today's activity

And there you have it 322 so look where the opening print was 321.90 right underneath 322 and if you read the notes what you saw is if the market opens above or below 322

That's going to tell a tale below was weaker they try to rally back up they fail what do they do they make a b line for 320. they came up short of the gap

But traders understand maybe i should phrase it this way traders should understand that if you have a position in this case let's just say you're shorting around 322. so we take a

Short position we want to ride it down to the big fat round number or maybe at the time we're potentially thinking in terms of the gap that's fine what do we do we take profit along the

Way what do we have once they get below 320 we have the remaining position on we have a small piece of what's left it's called a trailer does a pro

Trader ever have any trader treating this as a business does any trader ever have a full position left at final target and the answer is if you do

You're not treating this as a business if you don't then you're correct and by the way at the time we're looking for the gap to be support at least i was lighter volume quiet market

Wasn't really a debacle in the making it was just down back to the notes 955 check this out and there you have it so that's the 320 they could go lower but the 80 20 rule

Says we'll get a bounce in and around the big fat round numbers what did we do we got to bounce in and around the big fat round numbers hashtag reading the tape and moving right along

And there's your gap 10 o'clock 318 92 is the prize the how and the when is the trick moving right along so now on the way back up we want to cite the resistance they

Already did the thing on the downside now they've turned around 320 140 322 should be overhead resistance back to the chart we'll insert one more line in there 320 140

So on the way back up 321 40 should be resistance they spike it by a few pennies and then what happens they come back down once they come back up is it the same of course not

Then what are they doing they're going to 322. 322 was the pivot what happens once they get above 322 they come for a quick retest or back test

And take off to the upside what happens if they stay above 322. well it's not bearish anymore it's bullish read the notes go back to the chart and double

Check the work see what happened after the notes were posted here you go at 10 30 any trader that painted by the numbers did just fine we're gonna get to some stocks on the move so when you couple together what was

Going on here inside the numbers in the commentary plus stocks on the move it was a pretty good morning for many many many traders 10 40 you can see 322 coming up so now we've already got the setup working

After an hour's worth of trading if they go back down below the low of day they're going to go get the gap until and unless that happens no dice 322 start closing candles above that would be a bear fumble it pays to

Know this stuff during the trading day in case a trader wanted to stay short you know above 322 no dice you don't want a pie in the face and here's one other

Thing back to the chart i talk about this quite frequently i think it's worth doing it again so the market's gapping down what about the traders that sell into

The selling pressure they're selling into the hole what's likely to happen when you sell into the hole you're likely to get whipped out of the market what does selling in the hole

Mean selling in the hole means that you think the market's going down you see it going down you get fomo you think you're missing it all of a sudden you sell in here or you

Sell down here and then what happens the market goes like this you get a quick pie in the face and you go with your tail between your legs to cover the trade

Saying to yourself i did it again hint don't sell in the hull sometimes it works the majority of the time it's not going to work

Flip the 80 20 rule around on its head about 80 plus percent of the time it's not going to work moving right along here's an awareness thing 12 31 what happens in light volume quiet markets

It doesn't take a lot to cause a quick and larger move in either direction how do we know that we discussed it yesterday for one we're talking about three twenty five twenty they didn't get there today until

Aftermarket but still what support 322 moving right along i urge you to read the notes i urge you to go back to the charts i urge you if you're at all active in the market during the day consider

That this is helpful stuff how about 137 very quiet here's the deal going forward they've likely run out of steam for a while pullbacks are normal staying above 322 sounds like a broken

Record but guess what it was the pivot 322 leaves them in a position to try for another lay higher in an effort to fill the gap at 325 and change for example let's say they put in a

Higher low and start back up we see that all the time yadda yadda yadda so just for visual purposes this is what i was referring to so you have this big move up they run out of steam somewhere in here

The concept was you get a pullback in here and then a lower high and then take off to the upside make new highs fill the gap they do that a lot they didn't just do it during the market

Today they did it after the market session today but that was the concept of what i was thinking about moving right along here's where we start thinking end of

The day jam session was a question didn't happen moving right along and there's the end of the day you already saw that post about stocks on the move we'll take a look at the ones that hit their price

Objectives we had pi cop baxter and chef take note of the entries let's go to the charts how about a little reverse pie in the face haircut at the open

2260 was the number posted bright and early you get the bounce off that number the high is 2401 doesn't sound like a lot 40 cents on a 22

Stock is just what the doctor ordered and then some at a bare minimum you take something put it in your pocket comes back down to where you bought it you're out you still guaranteed yourself

A profit you move on that's the worst case scenario in that type of strategy or you take it all off you throw a few hundred bucks in your pocket or whatever it was and you

Move on to the next trade conoco phillips it's haircut at the open two numbers posted on the board 3715 35.89 here was the low from the second number

3590 bunch of front runners but you see the takeaway you see how the numbers work again this was one of those scenarios where the numbers were relatively close together doesn't feel like it when

You're in the trade i get that but can make an equal case for a bounce or support at either number so i put them both up paint by numbers is you would have been filled

At the second price you're halfway home or halfway in between as your new price or average cost and then it takes off to the upside anyway so either way was a base hit here's a different chart

Just so you see stock made a high shortly thereafter 3820 nothing wrong with that you get a dollar from the first entry it's a base hit how you doing the numbers work you don't

Know which ones are gonna go on the rocket ride you collect the base hits until you hit one out of the park you never know when the pitcher is gonna

Just groove one how's baxter doing this is what we signed up for haircut at the open big haircut at the open for baxter two numbers they're a buck apart they're close together

Make the same case for both numbers guess what you split the difference your average cost is 84 bucks you finish the day at 86. two bucks you move on have a nice day how about chef

How you doing here's the low in this candle 11.95 the low in this candle 11.95 the number posted on the board this morning 11.95 need i say more quick rocket ride the rest is history put it in

Perspective 11.95 12 stock 1 is 12 cents 2 percent is 24 cents within minutes this thing was at a high of 12.55 and the high all the way over here was 1273 so on percentage terms this was a nice

Trade to the penny apples you know the story you gotta love them apples back to the sp why so let's check this out so they're right around 327. here's the real time stuff going on

So let me move this over the high so far has been 326.91 so let's understand the significance of 327 back to the daily chart and check this out so the high over here 320 720

The high in this candle 327 23 they're challenging these highs above all the moving averages the market's in an uptrend what are they trying to do they're going to try and fill the gap

Don't know if they do it tomorrow however that's what they would be on their way headed to do if in fact tomorrow they start getting above the 327 area these highs start closing

Hourly above their gap above there all that stuff opens the door to fill the gap hard to believe need to be the umpire calling balls and strikes

Let me address this since the emails will likely flood in tonight are we still looking for a top and the answer is yes we are time is more important than price

I don't know what price the top will come in what happens if the top over the next week or so comes in at that gap do you think that would be an area that we would expect a reaction

In the other direction and the answer is whether it's at the gap or slightly above the gap the answer is hell yeah when we say we're looking for signs and signals of a trend change

Those are things that are taught in the course that's how we're going to identify where this top is going to come in when it's going to come in we're in the zone remember what we said

Yesterday just because we're in the zone like yesterday being for example day one doesn't mean yesterday's the top could have been and by the way let's say the market turns around we

Wake up friday morning and they're killing the thing yesterday's high would still technically be another top i'm not saying that's going to happen i'm just saying

Well that's it i'm just saying by the way was today meaning this morning this is post-fed stuff so yesterday they jammed the market higher with the fed today they drop it was that just post-fed shenanigans

Slash rope-a-dope stuff shakeout operation all that stuff you don't know it at the time but when you look back and take away something we can always learn something

From every movement the market makes so we look back and we say hey so yesterday they jam them up with the fed they drop them right after the fed it's kabuki theater we know all that stuff they miss the gap again they're in an

Uptrend above all the moving averages they're just creeping higher eventually we're going to see a spike out of this looks like tomorrow is likely the day

If this morning and let's just take a look at the flip side for learning purposes let's say this morning they got down here they filled the gap and they started closing hourly

Below the gap we're having a different conversation this would still be support that's an important spot this entire candle is important that's a reversal candle

We would be having a different conversation but we're having the conversation we're having based on what the market did we have no choice but to read the current tape we're going

To be watching the weekly close on friday what happens if they close the week above last week's pivot high what's that high same number 327 23.

Look at this stuff up here look what we have working friday so we have a huge breakdown candle high we have the tail high from last week and we have a gap

Up above they're getting into or at least trying to get into no man's land same chart from the daily chart just looks different it's good to get multiple visuals to put everything

In perspective camp iwm so interestingly enough they finished flat on the day were weak earlier finished flat but it's the same thing as the spy look what they're doing they're up a

Little bit in the after hours but not nearly as much as the spy but same routine above the moving averages riding the moving averages riding the 200 eating time off the clock

Looking to go fill the gap up above we talk about this one every single night there's no change how about our canary in the coal mine this is a number one favorite canary in the coal mine any change here

No absolutely not same routine stuck in the mud today a little bit didn't really go anywhere had the up move yesterday before all the stuff that happened after thursday's close canary in the

Coal mine that's the way it works a lot of times the transports will make a move ahead of other stuff which is why we're calling it a canary in the coal mine can always or hardly ever act on that

Stuff however it's good to know when we see it happening other charts other stuff is happening we put it on the table as a puzzle piece it helps us uncover

What the picture is shaping up to be look at this up move all they've been doing is eating time off the clock after an hourly big huge up candle a big breakup candle that was that 10 30

Candle from yesterday what's the 120 minute chart look like you have a big breakup candle eating time off the clock really in the upper portion mostly in the upper portion of the

Breakup candle above the moving averages the moving averages are sloping up you're challenging these highs again this is like the duck stuff the writing is on the wall when it walks

Like a duck and talks like a duck it's going to be a duck the majority the large majority of the time the transports are telling you higher prices are coming they're also telling me what about the

Silicon valley people the queues well look what's going to happen to the qs tomorrow they're at 265 and a half close the day here at 261 and change they're gonna have

A big move again to new highs has there been anything wrong with the qs has it been an uptrend as long as we stay below the breakdown candle high then there was a little bit of trouble

Here what if we break above or gap above the breakdown candle high well guess what you know the answer the same energy that would have been released to the downside had this bearish pattern played out

Right this is a bearish wedge pattern come down like this into the 20 or 50 period moving average or more that same energy that would have been releasing to the downside is now going to be released in the upside

Friday morning as long as everything stays the same what about the financials so the financials didn't do anything today so this is interesting in and of itself so is this telling a tale

Will they turn around tomorrow are they not going to participate and we're going to have a gap in crap who knows all i'm saying is these are all awarenesses we have to be aware that if

We do not meaning do not get participation from the financials if the market is spiking up you have to take notice it will become a puzzle piece and it

Will be on the table smash mouth again make new highs up three bucks today they'll be up more tomorrow as long as everything stays the same they're going to push

Around 170. the trend is your friend until the very end or until it doesn't work anymore right now the trend is up still if i told you how much i appreciate each and

Every one of you and that without you these videos are not possible true accurate information here comes the rip cord it's everything i wanted to and intended to discuss today so we're

Going to give it a wrap here i'm david frost my strategic forecast thanks for tuning in to another episode of common sense market analysis

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