*Japanese Candlestick Charting - a running exposition*

My intention with this thread is to investigate the predictive efficacy of Japanese candlestick charting. Many a practicioner swears by the forecasting ability of this Eastern method when employed in the hands of a skilled analyst. I make no claims at being such a skilled analyst therefore this thread will hopefully aid my development in this process as well as elucidate that it does not take a deft candlestick chartist to employ this technique.

Below I have have included six month charts in daily timeframe of the DJIA and the yield on the 10-year Treasury Note under the assumption these two can be generally viewed as proxies for the equity and fixed-income markets respectively. Over time I hope to incorporate other markets as representative of various asset classes including the US Dollar for currencies and oil or gold for commodities.

I aim to include a daily update should market activity warrant such frequency. I have included six months of price data below as a way to set the context rather than starting this project with no frame of reference.

One thing to keep in mind is that while many view Japanese candlestick charts as being unrivaled in signaling reversals and continuations the formations I hope to highlight going forward do not lend themselves well to projections or price targets. Western techniques are better for such a task. I plan to focus on candlestick patterns and as a result this will be a very short-term trend identification project. On some occassions I may incorporate Western techniques should I view them as enhancing the candlestick methods however my goal is not to focus on long-term trends but rather the day-to-day manifestations of the Japanese candlestick methods.

As with all technical analysis the following interpretations are subjective. You may see different indicators and signals than I do. I welcome constructive comments should I overlook a signal going forward.

The charts are telling us more about bonds today than they are about stocks. But keep in mind the bond market - Treasuries in particular - dwarfs the equities market so maybe that's enough to clue us in on future money flows.

Unfortunately for anyone reading this post looking for a grand revelation the following discussion is going to disappoint. Today's action in the markets we're following was mired in equilibrium with very little to add by way of changes in trend and it appears the markets are on pause ahead of ECB president Draghi's comments tomorrow. There were some subtle clues, however, which I'll discuss below.