It’s my birthday this month, so I’m looking at monthly candles: Not blowing them out though

Many markets this January have been a ‘Tale of Two Cities’ – or halves anyway. This has created a series of very interesting, and sometimes rare, single or two-candle patterns, reminding me of the song ‘Candle in the Wind’. Like the song’s lyrics, ‘’and it seems to me you lived your life, like a candle in the wind, never knowing who to cling to, when the rain set in’’. My gut instinct is to look carefully and special candles to see if they’ll give you a steer as to which way the wind is blowing.

Stock markets kicked off as bullish as they had been in Q4 2019, though volumes weren’t all that, some setting new record highs at, or just above, established long term trend channels. Then the coronavirus news broke and suddenly horns were drawn in. This month we’ll probably take one day at a time to see the extent to which this disease spreads.

Share prices in developed markets formed monthly shooting star type highs. My chart example of a single candle pattern is the S&P 500, which has similarities to a dragonfly doji. In this category we can lump together the Dow Industrial, Nasdaq, Toronto, Dax, Switzerland, Sweden, Russia and Amsterdam.

S&P 500 Single Candle Pattern

A second category are monthly (and weekly) charts with bearish engulfing two-candle patterns. Here we see FTSE 100, Spain’s Ibex, France’s CAC, Hang Seng, Jakarta, Russell 2000 and Dow Transports. The body of January’s candle is bearish and bigger than December’s.

Two Candle patterns

Other indices were once again rejected at established horizontal resistance levels, like Johannesburg and Mexico, South Korea and the Philippines.

A very, very select few just kept on roaring higher all January, to form impressive bullish Marabuzo candles. The Dow Jones Utilities Average powered ahead, having built up bullish momentum over the previous four months, to a new record high. But then, this is really a fixed income product masquerading as a set of very large companies.

Biggest surprise of all was Australia’s All Ordinaries which, despite bushfire and brimstone, managed to at last take out November 2007’s then record high.

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About Nicole Elliott

Nicole Elliott

A graduate of the London School of Economics and Political Science (BSc Social Psychology) Nicole Elliott has worked in banks in the City of London for the last 30 years. Whether in sales, trading or forecasting technical analysis has always been the bedrock of her thinking. Key expertise lies within all areas of treasury: foreign exchange, money markets, fixed income and commodities.

She has also added to the body of knowledge of the industry writing the first western book on Ichimoku Cloud Charts. Strong media links and a cult following are due to her prescient calls on the markets and often entertaining format.

Nicole can be contacted at trending@sta-uk.org

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