hopefulone's 'bottom sure smells close' friday, page-34

Intuition is correct that the similar hammer back in March was sold into the next night.

The next night was the low.

So - if you want to pick the exact low - a hammer may not do it. What does? But - in context they often set up a positive reversal situation near the end of a trend, as occurred in March.

Last night's hammer had a similar reversal %age as the hammer in March. Last night on the SPX the improvement from low to close was 1.63%. Back in March it was 1.62%.

Looking back over the past year it is common to see big reversal days at or near the lows of down trends. (See chart above.) So it's not a bad indicator.

The Monk pointed out:

"Interesting to see if we go on with it tonight or hover around this area for a bit shaking out a few more."

Last night was the biggest positive reversal since 20 July, 2010. So last night had something special going for it.

Following is a listing from Bespoke Investment of days since March 2009 which were down by at least 1% then rallied by at least 1.5%. Early in the bull market, big reversal days were more common than in the past year.



Good luck
Redb