last trading day for 2009, page-5

Here's an excerpt from my blog writings tonight:

The number of stocks in the 50 Leaders making new 20-Day highs came in at 18 - or 36%. That's a very high number. Such a figure would normally be taken as very bullish.

However, when we look more carefully at today's action, it's not so flash.

Here's a list of the stocks making new 20-Day Highs - with annotations beside them of the nature of the candle which discloses today's action. I've only listed bearish candles.

AGK - Dark Cloud Cover
AMP
ANZ - Squat bar
ASX - Bearish Engulfing
BHP - Inside Day
GPT
IAG - Dark Cloud Cover
LEI
LLC - Dark Cloud Cover
MAP - Shooting Star
NWS - Shooting Star
ORG - Shooting Star
SHL - Dark Cloud Cover
TEL - Dark Cloud Cover
TOL - Dark Cloud Cover
WDC - Bearish Engulfing
WES

So - out of 18 stocks making new 20-Day Highs, 13 had bearish characteristics on the day. Candle identification in the middle of a trend may have little significance. But bearish candles at the top of a trend take on much greater significance. This action today must be considered bearish even though the drop in the Index (XAO) was negligible.



Further, I'd like to direct your attention to one of the best performing stocks in the past couple of weeks in the 50 Leaders - Newscorp (see first chart above). Newscorp has had a stellar run recently and today made a new 20-Day High - but the candle was a Shooting Star - a bearish formation.

OK. So why have I picked out Newscorp for mention? One little used indicator is the Money Flow Indicator. It basically records buying/selling pressure on an intra-day basis. As such, a marked divergence between a bullish stock price and the Money Flow Indicator suggests distribution, i.e., strong hands have been taking the opportunity to sell during the day to weaker hands who are piling into the stock as it rides higher.

Have a look at the Money Flow Indicator on NWS. The divergence over the past eight days has been very negative. With a shooting star candle today, and a new 20-Day high recorded, Newscorp's run seems to have ended. As one of the leading stocks in the market, that doesn't bode well for the general market.

If the action today in NWS was an isolated event, one might presume that rotation was occurring between stocks - but today, most of the leaders also exhibited bearish characteristics.

Conclusion: today just might have been a watershed day.

We shall see. Still early days. But if tomorrow is a big black candle on the XAO - that will confirm at least the beginning of a short term correction.