Another Stock Market Reversal, of the reversal…

by birtanpublished on September 14, 2020

Hey traders David Frost my strategic forecast you're here for another episode of common sense market analysis today is Tuesday July 14 2020 we're looking at a daily chart of the s py or spider which is the proxy for the S&P 500 we got stuff we got a lot of stuff

On the docket to discuss today not only from an S&P perspective but we're gonna take a look around the horn and we're gonna take a look at all the different markets we cover we're gonna look at a variety of charts today's clothes was

Very important the price action at the end of the day was very important the thing the market did yesterday was very important and then to follow up with the opposite thing today into the clothes is very important we're gonna take a look

At all that stuff is it bullish is it a fake out what do we have on the board let's start with yesterday yesterday the market puts in a high above the gap remember that famous 3:19 gap they went up higher they reversed they finished

Near the lows the writing was on the wall that under normal garden-variety market conditions they would continue lower we would have follow-through based on the price action yesterday we had follow-through this morning but we also

Had a reversal and we finished on the highs remember last night's video the title was reversal city well guess what that theme plays on so let's go right to where the close was where was the close three 1892 against a very important

Number of 319 why is 319 important there's the gap 319 even is that gap as important as it was yesterday for example and the answer is no we've already been to the gap they filled the gap they were rejected from the gap now

They're backed up at the gap so on one hand it is important it's not as important nearly as important as it was yesterday it's been filled it's just a gap that's been filled what's more important up there is there another

Number north of that that's actually more important than 319 and the answer is yes there is it's from a psychological perspective but it's 3:20 and here's why because it coincides with the big fat round number

Of 3,200 let's pull back a little bit and let's talk about the bigger picture what's really important what's important is where the market is relative to the trend on the daily chart the trend is up on the daily chart here's the problem

When we go over to the weekly chart we know that we're at a very very interesting level of resistance we talked about it yesterday we have a breakdown candle high we have another breakdown candle high in roughly the

Same area so in and around this general zone we would expect the market to find resistance however when you go back to the daily chart the market is basically eating time off the clock above this 20 period and the rest of the moving

Averages for that part eating time off the clock to make another move higher as long as they stay up in this general zone the zone that we're talking about happens to be 3 24 and a half up to 326 there's other stuff along the way

Again that will be refined for inside the numbers members what we're talking about is if they're having what looks to be a melt up if they're having another leg higher if they're issuing a conveyor belt of pies in the face where are they

Headed they could be as high as 326 now here's an hourly chart let's go to the flip side and let's have that 30 103 10 discussion what happened there well obviously the market turned around what I said inside the numbers and we'll

Go over there in a moment is that we can expect 3,100 or 310 over the next day or so but here was the caveat above 317 and that really gets taken off the table what I want to do is discuss specifically for inside the

Numbers members why that is here's the common sense the logic behind 317 on the way back up you have this area where the market was rejected so they run up they try to get through they're rejected they try it again there

Ejected so we already know about that we've discussed that scenario before on 3:17 so it is a breakout area they come back they bust through if they get back up to 3:17 and beyond and begin closing hourly above they've recaptured that

Area that they couldn't get through before they were rejected a couple of times before there was acceleration on the way down yesterday past 3:17 getting back up there to me the writing is on the wall that's really bullish behavior

Then above we have that important 3:19 it was important yesterday it's close to the 320 the 3200 I'm just doing the mind day to dump remember inside my head is a dangerous place to be let's not forget about that so here's

The last piece to the puzzle on the 317 look where the hourly candle closed right over here from yesterday the close is 3 17 11 so I'm using 3:17 as the number it's a round number you start closing above there and all of a sudden

What do they want to do they want to run to test the high of that big breakdown candle what happened in the afternoon once they closed above what did they do they ran to go test the high they didn't get there yet but they tried to go test

The high of that breakdown candle guess what we talked about that all the time why do we talk about that all the time because they do that all the time short hop here's inside the numbers this is a learning environment the goal is and

It's really a force-feed situation my objective is for everybody to learn even if I have to force feed the information I'm gonna make you learn even if you're only paying half attention here's the pre-market commentary let's roll up and

Check out what was going on through the morning session you can pause the video and then restart it whenever you feel like it but I want you to go back to the charts and see what was going on after the commentary so here's something I

Posted before the market opened this is a picture or a chart of the S&P e-mini futures contract it's an hourly chart and what I wanted to show was the big breakdown candle and the bearish flag –is– thing that was

Going on before the breakdown that happened as we came closer to the opening bell so you'll notice there was a couple of things said about that chart here's what was posted in the early thoughts I'm

Describing what each one of those things were there were three things on that chart you had the Bear Flag pattern you also had a breakdown candle high and then you had a breakup candle low that was

Counter to the breakdown candle high it was a pattern inside of a pattern we've talked about that many times before you have to have an awareness what's going on in the market you have to look around the horn you have to see what's going on

Not only on what charts you're used to looking at but also some charts that you're not used to looking at you have to expand the horizons so here's a picture of that exact chart that was put up on the board before the market opened

So we had this thing working before the breakdown so it was here before this big red candle breakdown this was posted on the board now what you'll see is that this breakdown candle started at nine o'clock pardon me it ended at nine

O'clock this candle ended at ten o'clock some traders are going to say hey I thought the hourly closed was based on the half-hour and that is true here's a curveball when I read the continuous futures chart of the S&P I look at the

Top of the hour for the hourly closes only on this chart the continuous chart from looking at a Pitts session chart here it is this only contains the data on the chart between 9:30 and 4:15 this is what's known as regular session or

Regular hours this begins at 6:00 p.m. each evening and technically closes at 5 o'clock here's the last candle its 1700 hours the next candle is essentially tomorrow it's complicated you're inside my head

Do you need to know any of this stuff no that's what I'm here for I'm giving you the numbers and I'm really speaking to inside the numbers members when I say that that's what you're paying the price of admission for

Let's continue moving along past the early thoughts then we have closer to the opening thoughts as we scroll up you're gonna notice something pretty interesting on the 940 post they're going to do one of two things either get

To 314 82 that was a target on the upside where there would be overhead resistance it was the gap left open from yesterday's close you see in the earlier post it should be resistance or drop to

Around 312 now this one's pretty cool you know the routine right of the vertical today's activity five-minute S&P chart SP y3 1482 the market opens up runs up to fill the gap left open from yesterday you

Can't see it on this chart you can see it on the hourly chart this is the first hourly candle of the day there was an open gap they ran up to fill the gap it was supposed to be overhead resistance it was overhead resistance and they came

Down to three twelve to three 1175 remember from the 940 post three twelve to three eleven seventy five pretty funny how that works know thy numbers let's continue scrolling along and you can pause the

Video read the notes I urge you to go back to the charts see what was going on if in fact you're active in the market trading during the day this information anyway you want to look at it should be can be and is beneficial to those

Traders active in the market if you know what's going on if you know your numbers you know where the resistance is you know where the support is you know what happens if they get above you know what happens if they get below it's 90

Percent of the battle it's not placing the trade that's the hard part it's placing the trade at the right location that's the hard part let's move it along you'll see the numbers cited throughout the morning session

Throughout the day check them out for yourself they went into a light volume ChopShop formation before making that end of the day push higher back to 3:19 or the jam session but there's one other thing that I want

To point out we were focused on 3:17 remember 3:17 give or take is resistance by 159 funny how this works 3:17 was supposed to be resistance spwhy high 3 1699 pretty nice pullback they actually gave you a 12 handle SP pullback right

Out of the gate here's the one I'm referring to here's the high three 1699 here's the low in the same candle of three 1575 next candle of three 1591 more rope-a-dope late in the day and then they have the end of the day jam

Session net-net and here's a wrap on the hourly chart this traitor me I didn't think they would get through 3:17 so easily today thought they would have more trouble with it and I really did think and this

Is just is what it is this is what I thought thought you were gonna see this as it was happening and then we would see another move down completing what we know and we talked about this haven't in a while but we

Talked about this quite a bit an ABC pattern so the leg down was a B back up a retracement of sorts and this was at the time a garden-variety retracement those traders that have taken the course lazy e-mini trader know

Precisely what I'm referring to then you have another leg down completing the move that didn't happen they went up you have to expect the unexpected but here's what we did know inside the numbers start closing short-term candles

Hourly above 3:17 it's bullish period let's finish out the notes and you can see it turned into a little bit of a rodeo in the afternoon and then as we go into the end of the day you get into the anything-goes scenario there it is above

3:17 and their bullish let's also take a peek at the stocks on the move list not a great day for stocks on the move not a great day from the perspective of we just didn't get in the trades they just didn't do what they were supposed to do

Had some jump targets some missed targets it is what it is we have to take what the market gives us the good the bed and in fact the ugly wells-fargo it melted down into the opening bell

Rather than putting another price target on the board which would have been lower anyway I just left it alone you don't want it if the stock opens below the price that's what happened here opened below went lower then it fought back to

The number but there was no trade there just goes to show you and here's the takeaway the number was still important the market opened or WFC Wells Fargo opened below the number just takes it off the table that's just the way I do

It that's the strategy it works because when they open below the number it's the market or the stock's way of telling us something something different is going on there's a different destination sometimes I have the different

Destination today in Wells Fargo I really didn't have it about Delta tal so here's what happened here the number on the board was 25 65 what was the opening price opening print 25 64 no accidents or coincidences they just opened one

Penny below the number shut up some traders get scared away some jump in you see what happened I count it as a no trade because it opened below the number but again the takeaway is look at the number obviously that was the number

Look what happened just minutes later they're at a high of 26 75 did a little bit of a back test to where the same area that was the number it was important it was a destination they ripped higher right when they got there

It just opened the penny below the number that's just my rule the way I write it out for me takes the trade off the table the takeaway is look at the number GSX the way we do this two numbers close

Together we take the first part of the trade 50% of the position for example at the first number put on a second half at the second number we have an average in between and obviously if you paint-by-numbers you had a nice trade on

Your hands later on in the morning session making a high of eighty dollars and seventy cents again you can see again the takeaway what's the low here in this candle 77 82 against number of 7778 that was obviously the

Number or at least in and around the number in the morning rush the morning frenzy the shakeout operation they spiked through numbers but when push comes to shove the numbers that are important the numbers that are supposed

To be important are in fact important Southwest love didn't really come close 31 61 was the number below happened to be 31 75 it's close but it's not like within a penny and look what they did they really really ripped to the upside

That's a rocket ride spot didn't do it the number was 240 99 the low happened to be 243 not really that close we only want the trades at our number not somebody else's number somebody else's number might work but I know my numbers

I'm only willing to take trades at my numbers what about camp IWM if you read through the commentary from inside the numbers you'll notice early on we cited the IWM and the transports were leading to the upside that was interesting

Information it's an awareness look what happened later not that that's gonna tell you everything but the more awareness pieces to the puzzle you have the more puzzle pieces you have the better off you are doesn't mean this is

A one day turnaround in the market however you have to really take stock and the fact that it was up over 2.6 percent today against the SPI that was up about 2% today and the transports were up about 1.7 percent you have to

Take notice of this stuff when these favorite market leading indicators are leading and one was leading more than or leading compared to the SP why the other was just up meaning the transports were up they weren't leading they weren't up

More in percentage terms than the spyder but you have to take notice of this stuff if the IWM is not melting down and the transports aren't melting down and the financials aren't melting down it's unlikely the markets gonna melt down

That's just part of that common sense Market Analysis stuff we don't really have any new information it's just interesting to see it leading to the upside whether it means anything into tomorrow we'll see if we get a reversal

Of the reversal of the reversal we'll just handle that in real time what about the folks down at the Transportation Department remember we still have an unattended – gap 95 7907 it was not filled here was the high at 9500 1 and

Change not filled if they hit the gap for example tomorrow let's say they're pushing up tomorrow past the high from over here and they're going to fill the gap they could stop short at the gap they could stop at the 200 period moving

Average the fact that they came close to the gap and pulled away the next time up at the gap it doesn't have the same type of resistance that it would normally have on the first run we talked about that all the time and the reason is is

Because it's relevant all the time if they're doing the push hire thing I would say they're more likely going to get up in – and probably spike through the 200 period moving average then they are likely to stop short and reverse at

The gap how you doing the queues pretty good reversal yesterday was this a garden-variety retracement are they not really going to get to at least the 20-period moving average if they don't it's uber bullish

If they start pushing past – 62 – 63 for example they're gonna try and make a run for the breakdown candle high the trend is your friend until it's not pretty good reversal yesterday and I said that twice for a reason we were up 1% today

In the Q's it's a garden-variety retracement of the move down doesn't mean it's over doesn't mean it's not understand where the trend is the trend is your friend until it's over also understand that the Q's are made up of

Just really a handful of big stocks if they start moving in one direction or another it moves the Q's a lot we know about all that these are all awareness things the reason why I dug in a little bit – the

Q's today is because I do get a fair amount of questions on the Q's I know there are traders out there who trade in the queue just trying to add some additional color the financials the XLF now they're above

The 20 period 50 and 100 period moving average all of a sudden it goes from melting away the other day flipped back around looks like if they eat some more time off the clock they can make another push higher staying above these moving

Averages is and I'll say short-term bullish for the XLF again you have a similar situation with a totally different look look at this weekly chart look at this big huge breakdown candle and they can't really even get up into

The meat or the heart of that breakdown candle they tried once we rejected if they do they can move up into these moving averages if they don't that's the markets way of telling you that they're essentially putting in a Bear Flag

Pattern rather than creeping up to the high of the breakdown candle now they start doing up here that's a different story then they're gonna creep up and up and up but if they can't get up into the meat of this breakdown candle then

Really the dominant force the dominant pattern would be this weekly chart bear flag pattern that's what I see in the XLF smashmouth here's the weekly chart let's go down to the daily looks similar to the queues but in slightly better

Shape is that trying to tell us something the SM H is a leading indicator of the tech space so if the leading indicator on the chart looks slightly better than the actual thing that it's indicating or

Leading then maybe it's trying to tell us something either way and I know that was a jumbled bunch of stuff but you're inside my head what do you expect either way the SM H is bullish it's in an uptrend

Technically speaking just like the Q's other than the fact that there was a reversal yesterday the longer picture perspective on the daily chart is there's nothing wrong with this chart above all the moving averages the trend

Is your friend until it's not let me clear something up real quick we had a reversal candle yesterday here in the Q's of other places so traders would say well if we had a reversal candle then why doesn't the

Market just fall out of bed well that's not the way it works what's actually more dominant on the chart the reversal candle from one day's worth of trading or a trend that has been in development for weeks or months and the answer is

The trend is more dominant than one day in the market if you're in an uptrend and you're above all the moving averages you can have a bad day you can have a bad day two or three but if the prevailing trend is higher and you don't

Break trend that's the dominant thing that's going on in the market we'll leave you with that if I told you how much I appreciate each and every one of you that is absolutely true and accurate information we're gonna pull the ripcord

Here today I'm David Frost my strategic forecast thanks for tuning in for another episode of common sense market analysis

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