DJIA Daily Market Analysis Tuesday May 23 2017

With the superb recovery of the DJIA and excellent gains in Nasdaq, is a short term reversal at hand? That is the question that goes on in the mind of a professional trader when the stock market has a nice few days run.

This is roughly how the market participants operate:

1st day of bottoming = Professionals dipping their toes, buying things cheaper when DJIA is at support levels
2nd day = Professionals buy a lot once a short term uptrend is confirmed
3rd day = Professionals add a little more, the public starts to get a bit confident
4th day = Professionals a bit wary, the public starts buying
5th day = Public buys and buys while professionals start to sell, market tops out and a topping tail forms in the chart

Sometimes the process is a bit longer and the time period is switched to weeks instead of days. But I think you get the idea. At this moment, the prudent investor or trader will start to think if the rally has legs or is the market topping out for another short term correction. Well, if we follow the strict criteria of choosing stocks with relative strength (the 1%), we do not need to worry so much about corrections in the market because these stocks will not drop that much but keep rising after each correction.

Anyway, we really had a very very good run in the major indexes. Stock markets all over the world has also followed Dow's lead and rise. Black gold (oil) also had its nice 60 min bull run. Lets take a look at what the charts are telling us: