As normal trading hours wound down today, I mentioned on Twitter via Stocktwits, that the current candle formation on the SPY daily chart is an ominous sign for the bulls.
The Shooting Star
The shooting star is one of the more basic candlestick formations. It is the final candlestick in the chart above. What characterizes the shooting star is its gap up at the top of an uptrend (known as star position) combined with its upward pointing wick, and small body. It tends to signal the potential for a bearish reversal, and the fact that the body itself is red makes the formation even more bearish. For more on candlesticks and chart analysis, StockCharts.com is a great resource.
What’s Happening Here?
Basically the bulls have been pushing and pushing and they’ve started to become exhausted. After everyone goes home tonight and does their daily analysis, it is likely that they will notice this pattern and it will become a self-fulfilling prophecy. The weaker bulls will bow out, and the weaker bears will suddenly find their balls.
I expect tomorrow will be a down day. We may close the gap from this morning. Next week will certainly be interesting, as we may see a pull-back to the 96 range on the SPY.
Update: No bearish confirmation the next day. The market continues to defy gravity. Candlestick pattern fail.
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