Evidence of A Bottom Looking Stronger
- Bullish piercing white line
- Bullish volume
- VIX signaling volatility retreating again
Bullish piercing white line
Tuesday’s market action suggests that the selling squall is over, at least for the time being. That’s because a couple of indexes experienced a bullish candlestick pattern known as a piercing white line. These develop, after a decline. The first candle in the pattern should be a long black day. The second is a white candle that gaps down below the previous candle’s low, but closes the day half way up or more of the real body of the first. Chart 1 shows this for the Dow and Chart 2 for the NASDAQ. These patterns begin with the sellers very much in control, especially at the opening of the second day. By the end of it though, it’s the buyers who have the upper hand since they have reversed much of the damage done during the first day. Note that Tuesday's close took the NASDAQ back above its 50-day MA.

Chart 1

Chart 8
I think the probabilities favor, that for all intents and purposes, we have seen the low for this move. That does not mean we can sit back and enjoy the rally because bull market corrections often take the form of double bottom formations. That means that a probing of today's low later down the road is well within the realm of possibilities. Careful accumulation is more the order of the day.
Good luck and good charting,
Martin J. Pring
The views expressed in this article are those of the author and do not necessarily reflect the position or opinion of Pring Turner Capital Group of Walnut Creek or its affiliates.