Hammers on top? 2/7/2013

There is a process in any top formed in the markets, even if it is a short term top.

You can be sure market analysts, watching the battle between the bears and bulls around the 1500 SPX mark, noticed that we had a hammer type of candle on the SPX both yesterday and today.

The bulls are getting tired and having a hard time pushing the market higher.  The bears are trying to sell the market lower but are met with buyers coming in and buying the dips.

The hammers on top (the candle formations look like hammers) can signal a topping pattern.  On the other hand, at some point, if the bears can’t successfully drive the market lower, they will cover, and a short covering rally will move us higher on strong volume.  This is a classic tug -o-war.

Rather than anticipate a breakout higher, it would be safest to wait for it to occur.  In the meantime.  Keep your stops in place.

Members, check back later for a detailed video analysis and some stock ideas.




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