At 1:50 on Wednesday, the first of two high wick or long upper shadow candles formed on the ten minute SPDR S&P 500 (SPY) chart. It looked like a tradeable pullback was coming, similar to the one that followed the eveningstar reversal pattern that formed just after 11:00 and took price back to the VWAP, but instead there was a ramp up into the final hour of trading.
On Thursday the ETF was tracking lower going into the final two hours of the session and there was a rebound that saw the broader market rally into the close. Then, in the final session of the week, the 234.40 level acted a solid resistance for most of the day, until around 2:00 when the SPY broke above that level and rallied into the end of the trading week.
These small reversals in price had a larger effect on the appearance of the daily candles. In the case of Friday’s candle, instead of a large bullish white candle forming, a high wick or upper shadow shooting star candle would have formed suggesting an inability to hold all-time high levels — what would have been a clearly cautious candle.
Does this price action suggest machine manipulation or simply reflect the dynamics of a momentum driven market? I think the latter, but either way it is tough to trade.
The S&P 500 index was down 0.12% for the month and a second small doji candle formed on the chart. A doji has a narrow opening and closing range and represents an indecisive struggle between buyers and sellers, and they are often seen at transition points in the market. Two consecutive dojis on a monthly chart is unusual and the continuing indecisiveness suggests a reversal in the current trend.
The 30 minute chart of the S&P includes a red regression line, which is the best-fit straight line of closing price over the period, and it is in bearish divergence to the flat line of the opening and closing prices, while the daily chart shows the index making higher lows over the last three weeks of the month, under the horizontal 50 day moving average.
September was an unusual month from a technical perspective, hard to interpret and harder to trade. At this point in time, the charts locate resistance in the 2190 to 2170 area, and two immediate levels of support, one between 2150 and 2140, and the second at the 2120 level. It is impossible to make anything more than an intraday commitment to direction until those levels are broken and the market either continues on or reverses trend. Be patient and preserve capital.
The major market indices pulled back sharply in the first hours of trading today, but between 11:00 and 12:00 they began consolidating in a horizontal channel that can be seen on the ten minute chart. They powered back higher in the next hour, consolidated again and finished the session back near their highs.
The early downdraft and the subsequent bounce formed what appears to be a hammer candle on the Dow daily chart above the low this month and the rising 50 day moving average. Similar hammers or narrow opening and closing range doji candles formed on the S&P 500, the NASDAQ Composite, and the Russell 2000 Index charts.
Follow-through action or lack of it will decide if these are hammer candles that will forge a bottom and propel the indices higher, or ominous hanging man candles. The hanging man is a candle very similar to the hammer, except its real body is positioned near the upper end of the overall range and they form near tops and signal downside reversals.
It’s early in the session but the $DJIA is retesting this month’s lows, and its 50 day moving average – a MacD divergence and the declining money flow is not encouraging going into the close. Multiple timeframe re-cap coming up tonight.
Tesla (TSLA) shares can accelerate forward really quickly and then go into reverse equally as fast, just take a look at the ten minute chart. When Elon Musk tweeted out at 11:23 today that there would be a product announcement at 3:00, shares of the stock took off, but when the announcement came at around 3:30 informing the public that the Model “S” would be capable of going from 0-60 in 2.5 seconds, they rapidly reversed direction and sped lower.
This was the moment the market realized that the Federal Reserve statement was not really bullish.
The market traded in a narrow range all day continuing a pattern that began in the last half of Friday’s session. The thirty minute chart shows the contracting ribbon of Bollinger bands and the Bollinger bandwidth indicator at the bottom of the chart, which is at a level not seen since late April and which was followed by a volatile two days.
The ten minute chart highlights the channel pattern the SPY has been moving in and a break above or below the boundaries could be followed by another several days of volatile action.
The S&P 500 head and shoulders pattern neckline has been broken but only an intraday basis and that is important to remember, because a rally into the close today that creates a hammer candle at this key technical level will completely reverse the appearance and the interpretation of today’s movement in the index.
That said, the next levels of support are first the 200 day moving average, and below that the 1950 area which was the neckline of the “W” pattern breakout that initiated the rally this year.
The talk on CNBC is that the proximate cause of today’s intra-day reversal was the result of comments made by Carl Icahn this afternoon on their network.
Let’s go to the charts….
Ok, no argument from me. Tomorrow may be a good time for some positive push-back by a Federal Reserve Governor.
The market was higher early in Tuesday’s session building on Monday’s gains, but that momentum shifted dramatically around noon. The ten minute S&P 500 SPDR (SPY) chart shows the decline in price and an increase in volume that began midday.
The reversal and weak close formed high wick, narrow opening and closing range doji or shooting star candles on the daily major market index charts. These candles reflect a failure to hold a higher price and are often seen as key reversal candles, but of course, like all technical signals or candle patterns they require follow-up confirmation