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Market Hammers Out Bottom as Fear Peaks
Today the market rallied off the lows, and fear seems to have peaked.
If you’ve noticed, I end all my weekend posts with “what to look for” this week.
As always, I say we need to look for a candlestick reversal. In Sunday’s post, I stressed the importance of a candlestick reversal on ALL three indices. Today we got that, with the VIX confirming.
The Volatility Index (VIX) signaled a bottom is in, because “fear has peaked”. This was the confirmation I was waiting for to trade more aggressively.
Here is a quick look at the chart. See how crystal clear each candlestick pattern is?
Dow Jones Hammer (Daily)
S&P 500 Hammer (Daily)
NASDAQ Piercing Pattern (Daily)
VIX Shooting Star (inverse of a Hammer; Daily)
Notice every time the VIX peaks, the market rallies?
Early December peak fear = rally
Late January peak fear = rally
Late February peak fear = rally
Early May peak fear = rally?
To learn more about how reliable the VIX is with spotting reversals, check out this post, Buy the True “Dip” With This Powerful Chart.
Now is a great learning opportunity to see the potential power of candlesticks.
Expect a tradable rally into the Fed announcement Wednesday, as all three indices confirmed one another, and those confirmations were further confirmed by the VIX.
Happy Trading 😊