A Great Hammer is Formed

[Opps ! Made a typo error - Supposed to be a Hammer (not a Hanging Man)]

It has been 2 horrifying days (Thursday & Friday) for some and profitable for others. For some others, it is best to stay in the sideline.

As for me, I was caught in the wrong footing on Thursday. My trading psychology was not even average. I've got burnt somewhat. But I make it up with a strong showing yesterday - playing ES (S&P500 e-mini futures). I played the market until 2pm EST. Thereafter, I was too exhausted and shutdown my PC. I do not want to return my profits to the market.

Looking at the SPY chart today, the market actually took 4.5 hrs for SPY to drop about $2 but took the next 2 hrs to rise up and ends positive. It thus created a Hammer in the daily chart.

What does it mean then? To me, it might give me the opportunity to long the market (at least on the Intraday basis, once the SPY breaks Friday's high. I will try to keep the Stop Loss small - have to look at the Intraday chart on that day.

Based on the current behaviour of the market, general market can still drop further. However, for the market to be healthy, the current drop needs a short rest and create a short rally of least 50% Fibonacci retracement. The question is, where will the short rally starts. (I am looking at a basic ABC wave.)

The Hammer with an extremely long shadow but small body looks like a very good reversal candle. It looks like a good place to start the short rally. If indeed, it is, then the rally will reach at least at 109.85 before continuing with its downtrend.

If the market breaks the last Friday's Low and stay below, the market is then signalling that the current downtrend from Jan 2010 High is still on track.

Cheers !

PersianCat (Millionaire-in-progress)