Big thanks to Wargasm for putting me on to the Think Or Swim platform. Has great charts. and great indicators. Navigating the platform took some time to learn but it's good stuff.
This chart is of the Dow jones over the last 3 months. Each "candle" on the chart represents 1 day on the Dow Jones.
The indicator lines moving through the charts are a variation of a moving average (three middle lines) known as Keltner Channels, and bollinger bands (red and green lines) that are for the most part extended outside of the candle sticks and the keltner channels.
If you see the "hi 27850.21" bubble indicating the high of the day, the candle sticks are extended outside of the bollinger bands. That signals overbought territory. It's suggesting the market as a whole is essentially getting too greedy, and that a pull back is likely.
it's pretty rare to see the dow jones go beyond the bollinger bands on a time frame like this. so it was a big signal by itself that a pull back was likely.
next study down is volume. not a whole lot going on there other than maybe some increased volume.. and that there were 7 consecutive green days in a row, when the longest stretch of green or red days prior to that was 3 days in a row. So it supported the argument that the market was most likely way overbought.
next study is the RSI indicator. there are 2 horizontal lines. 30 and 70. If the line crosses 70 mark it turns red which indicates overbought. If it drops below the 30 mark it indicates over sold... so again this supports the argument that the market was in overbought territory, and was due for correction.
next indicator down is the DMI. When red line crosses above red line, it indicates downward trend. stocks moving down. when green line crosses above red line it indicates upward trend. the blue line shows the strength of the trend. when blue line is sloping up the trend(in either direction.. up or down) is strong it has good momentum. sloping down means trend is losing momentum..
so the DMI is showing us that clearly there was an upward trend that reversed momentum on like June 9th... which wasnt as big of a predictor in forecasting the down turn as the other indicators.
but if you were looking at this chart on a daily basis, you would have had a lot of evidence supporting a likely pull back/reversal/correction in the market by June 7th. 2 days before it actually started happening.
