The recovery in the SP500 and Dow yesterday was quite powerful and with the Nikkei up overnight as well, I suspect we will see a higher Europe this morning. The problem with the pattern in the SP500 is that a "hammer" is normally a bullish pattern, and many will believe so (I have included a little picture of what a hammer looks like), but if it comes after an extended bull-run it often means the market will settle into a range.
hammer
As you can see from the image below there are plenty of examples of both bullish and bearish scenarios. I haven't included all of them, I am sure you can find more yourself. However, on the ones you do see, you will notice that in some cases the market rallies, and the clue is when the top of the hammer is taken out to the upside. On the chart below I count a handful of "bullish hammers" which caused the market to have a sizeable decline subsequently. So just be a little careful by indiscriminately say that a "hammer" pattern is bullish.
click on link to enlarge image
I was in Kuwait over the weekend and Monday, which was an amazing experience. That is one truly breath-taking place by any measure. I was teaching some simple market trading techniques to students at Kuwait University. The show was geared towards Forex. I have never really traded Forex-just because I prefer indices. However, as I was supposed to trade live, which is always a good laugh - although slightly nerve-racking to be put on the spot - I traded the Pound Dollar. I am writing this because I realised that (although I have said it so many time before in seminars) if you can trade one thing using charts, you can trade anything. I shorted the Pound Dollar at 199.72 and added to the position at 199.64. I am still in the position, and have a stop at 199.30. The bottom line is that I want to include some more currencies here on TraderTom, starting now.
The Sterling Dollar has been trading lower for about 13 days since hitting the highs of 201.33. The arrow points to why 199.10-20 is an area of resistance, with a nice sideways formation and a break. A move above 199.20 should trigger some stop-losses. The Map for the Sterling Dollar points to a trending day, so I am inclinded to stay short until 199.20 breaks and reverse long above.
You can see the Map for the Sterling Dollar below. There is free access to the Map today as well.
ANALYSIS
