The bulls put on a good show last week. The S&P 500 tacked on over 2% for the week and the Nasdaq gained about 1.4%. Both indices closed near the highs of the week. Volume was mixed though — the S&P finally had an increase in volume on an up day but volume decreased just a tad on the Nasdaq.
I’m showing SPY instead of the actual S&P 500 in order to show the gap up on Friday. The index made the bulk of its gains on the opening gap and then chopped around for the rest of the day. The result was a bearish hanging man candlestick. I’ll be looking for some weakness to confirm that pattern.
The Naz also made a hanging man on Friday. It’s stalled right near the February high, so the double-top scenario could still play out… Alternatively it could be forming a cup or cup & handle pattern.
Here’s IWM, the Russell 2000 ETF proxy. Like the Nasdaq, it’s probing resistance from the February highs.
No changes.
| Trend | Nasdaq | S&P 500 | Russell 2000 |
| Primary | Up | Up | Up |
| Intermediate | Up | Up | Up |
| Short-term | Up | Up | Up |
(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend
Sorry, confused on the SPY candlestick you showed. . Wouldn’t that be a bullish hammer, not hanging man? I can understand the Nasdaq being a Hanging Man.
Guess I still need a lot of work on candlesticks. .
Kevin: the way I understand it is that a Hammer and a Hanging Man are trend reversal indicators. A hammer indicates a possible bullish reversal to end a bearish trend whereas a hanging man indicates a possible bearish reversal to end a bullish trend.
Thus Mike calling the *possible* Hanging Man makes sense b/c it’s the proper candletype in a bullish trend.
I’d like to see the trend run a little longer on SPY, to the mid-150s because the daily volume is supporting the bullish trend but SPY is up 14 out of the last 16 days so who knows how long it will last.
If April earnings continue their course, it could happen.
One of my big concerns is the A/D line has been more red than green for the past couple days, but I think it’s been mostly small-caps getting spanked.
Kevin — u r 100% right…bullish big-time
Kevin,
Just as Bryan already said, a hanging man appear after a rally while hammers appear after a downtrend. You can think of hammers as “hammering out a bottom” and a hanging man pattern actually looks like a hanging person — think of the real body as a person’s head and the lower wick as the legs. You would expect to find somebody hanging from a high place (after an uptrend).
Bryan,
Yes, I think small caps are largely to blame for the A/D line. Let’s see what comes of it.
Hi,
When you are talking about S&P, why do you use SPY? The candlestick for $SPX cash and ES future both are solid bullish white bar. Just to show the gap? Yes, Naz and QQQQ don’t look that good.
Thanks!
Jack,
Yes, to show the gap and the “true” open. That makes a HUGE difference for candlestick analysis.
Thanks Mike.
So basically when you check S&P chart, you take a look at both cash index and SPY?
I generally only do that on days when there are gaps. If I see reversal candles on the Nasdaq chart and many individual stocks but not on $SPX, I’ll pull up SPY to see what its candles tell me.
In general, any index that includes NYSE stocks is useless for candlestick analysis b/c of the staggered NYSE opens for those stocks. The gaps never show up, so if you care about the gaps you have to look elsewhere to do your analysis.
Terrific info.
Thanks!