Tom’s Weekly Newsletter September 21st, 2022

Originally published via our newsletter previously. Subscribe for early access!

What is an ‘Inside Day’ and What does that mean for the Markets

An Inside Day is part of a 2-period or 2-day pattern where the range of the day, (the Open High Low and Close) of a day is within the range of the previous period/day.

Today wasn’t a picture-perfect Inside Day as the low of day exceeded the low of the previous day.

It does show indecision, or should we say no clear winner between the bulls and the bears, (even though the Dow did close up 30-points).

It could mean the markets selling in this case, since the first day was bearish, the sellers have exhausted themselves and we can expect a coming bounce.

It could mean the sellers are taking a break until they wish to resume selling again. It’s this last possibility where we see an Inside Day become a part of a longer Japanese candlestick pattern called a Rising or Falling Three Methods Pattern.

Firs a 2-day pattern called a Harami (bullish or bearish) forms. Then the next two days if they, the bodies at least of the next two days, form within the first candle body, THEN it becomes a Rising or Falling Three Methods.

Image 29
Bullish Harami
Image 30
Bearish Harami

If that pattern eventually forms we will bring that back to your attention with visuals. Right now, the markets are taking a pause before the bulls or bears tip there hat as to what they will do from here.

Tom Gentile
C1P: Chief 1-Percenter

Four Corners of the Market

SPY – SPDR S&P 500

SPY - SPDR S&P 500 Darknet B
SPY - SPDR S&P 500

TLT – iShares 20+ Year Treasury Bond ETF

TLT - iShares 20+ Year Treasury Bond ETF

TLT nudged below price support at 108 off and on the last 7-trading days.

With the markets trading lower yesterday it stands to reason the bullish day yesterday for bonds happened as the two tend to trade inverse to each other.

Today was more of a day of indecision for the equities markets where bonds, represented by TLT in our Newsletter, had another bullish day today.

This could be a more bullish indication of prices higher if it weren’t for the concern it looks like TLT is having bit of a tough time clearing this support price area.

It is right there though. And though it looks like it may go higher this will only be clear should it happen in the next coming day or two and we see it in the chart.

UUP – Invesco DB US Dollar Index Bullish Fund

Image 34

The Bearish Engulfing Pattern has established itself as overhead resistance for UUP.

Image 35

The price action from that two-day pattern since is one where it traded lower, as that pattern suggests it will do.

It dropped as far as a previous old resistance price area that has become a new support.

UUP has now traded higher the last two days, but today and yesterday formed an inside day.

Does that mean things go lower or will it run up to test or exceed the prior pivot high.

USO – United States Oil Fund, LP

Image 36

The circle placed in the chart image above for USO can be considered an Island Reversal Pattern.

That is where a day or two gaps away from what can be considered an exhaustion gap followed by a what can be considered a breakaway gap.

In this case it happened at the bottom of a trend or at support so we can consider this an Island Reversal bottom.

Though the upside gap could be deemed bullish, the last three trading days are narrow range days, and they are all pretty much Doji patterns, (indecision days where there is no clear win for the bulls on any of those days).

If things ramp higher so be and that would be good news for the bulls, but one has to be aware a retracement to prior lows is a possibility as well.

GLD – SPDR Gold Shares

Image 37

The bullish engulfing pattern talked about last week only lasted a week as GLD is now trading back at a support level.

The concern for GLD or Gold Bulls is what happens from here?

An ideal situation would be for the test of support happen, hold and GLD bounces higher from here.

An ideal situation for GLD or gold bears is that it breaks support and trades much lower, and it feels more bearish than bullish right now.

If it does break and close below support, and one can make a case for that already being the case based on what happened today, one would have to use the widest width of the triangle patter resistance to support to calculate a potential price move amount lower.

The thing is where do you figure the resistance price of the triangle is to do that math?

Darknet

Darknet is considered a Contrarian technical signal or pattern in which one is looking for a pullback in a price of a security, preferably in an uptrend where the software scan paints a B, R or A on the chart.

B stands for Bullish, R for Reiterated Bullish and A for either Aggressive or Abandon.

That letter is a signal the security may have pulled back far enough and is poised to trade higher.

Or in the case of it happening in an uptrend, the pullback happens, the letter signal populates on the chart, and we then expect a resumption of the trend.

One can find Darknet in the tools if they subscriber to the Contrarian or Complete Trade level in the tools.

One way to bring up the Darknet results is to Log in > Hover over the Home Tab and left click the line item Darknet Signals.

The reason we are compelled to look into Darknet today is the markets had a big pullback yesterday and today was a stall, neutral or Doji day where markets closed pretty much where they opened.

There might be a Darknet signal or two on some stocks in a pullback that may be testing multiple trend channel support price areas that the Darknet scan picks it up and highlights an B (BULLISH) signal.

B is the first signal that the pullback may be over, and a price move higher can be expected.

Lets run the scan and look at the results…

We are looking for the B and the cool thing about the scan and the software is it will paint the B signal and then the tools will search the options to see what option, a Call option, can potentially double with the smallest percentage move in the security.

Image 38

On the Darknet page:

  1. Click the window to select All Darknet Stocks or leave it as is if it’s already there.
  2. In the dropdown window shown select Call Option Trades and 
  3. Click on Search

We are using yesterday’s results as there wasn’t a security out there today. It may be because the markets sold off so much recently they have surpassed the multi-price supports.

Image 39

You see the security ticker and the name.

You also see the green hyper link to click on to being up the risk graph of the option shown, which…

… is one the list because out of all its options it is the one with the lowest percentage amount move needed for that option to theoretically double in value.

Tom Gentile
C1P: Chief 1-Percenter


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