Volatility’s Inverted Hammer Doji Warning to Bulls

February 5, 2020

Mish's Daily

By Mish Schneider


An inverted hammer doji is created when the open, low and close are all around the same price.

Often, this candlestick pattern signals the end of the down move, or that a reversal is possible.

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After a downtrend, this type of pattern could mean that sellers are growing tired.

Furthermore, although the last couple of days brought back euphoria into the market, with volatility hanging tough, one should be prepared for anything.

When encountering an inverted hammer, traders often check for a higher open and close the next day to validate it as a bullish signal.

As far as the inside weeks, only two instruments in the Economic Modern Family are left with that pattern.

Transportation IYT needs to clear its range-197.95-188.93.

And Granny Retail XRT needs to clear its range-45.15-42.90.

Everyone else took out last week’s highs today.

So, if IYT and XRT are signaling any impending weakness from here, watch the volatility index VXX to take out 14.75-14.86.

Otherwise, watch IYT and XRT to see if they too, can clear the prior week’s highs.

On July 12-13, 2020, I will be speaking/teaching at the Modern Traders Summit in Philadelphia. Only 5 speakers, which means attendees will get a lot of attention, I hope to meet many of you there.


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S&P 500 (SPY) New all-time highs. 332.53 as first line of support. Then lower 327.31

Russell 2000 (IWM) 165.56 key support to hold

Dow (DIA) 293.61 the all-time high and 287.72 underlying support

Nasdaq (QQQ) Another new all-time high. Must hold 226 area.

KRE (Regional Banks) 55.85 ow support to hold.

SMH (Semiconductors) 145.58 last week’s high now support to hold

IYT (Transportation) 197.95 point to clear and 195 point to hold

IBB (Biotechnology) 118 key support to hold

XRT (Retail) 45.15 point to clear

Volatility Index (VXX) Look for this to hold around 14.30 and clear 14.73-14.86

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