I SPY with my little eye : a RARE SPY candlestick pattern
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This is an unusual highlight, but I am so excited, and you would read on to find out why...
Previously outlined, on 3 August, I played the devil's advocate and looked at a counter trend scenario. In this scenario, the SPY was still below the weekly 55EMA, and could fail to break above, then break down much further. Thing is, the weekly SPY chart is bullish as ever, and it looked possible but somewhat remote.
At the beginning of the week, there appeared to be be some stalling and indecision on the SPY daily chart (yellow circle) and, over the last two days, with less than terrible data as expected, the SPY gapped up not once but twice. On Wednesday, the gap up was huge (see left 1H chart), and the day ended with what looked like a Gap and Run. This was followed by another gap up on Thursday, albeit a smaller gap. This was the first remote indication that the rocket to the the moon was about to sputter. As the day wore on, the SPY closed the gap... and very precisely closed the gap, in what is commonly known as Fading the Gap, or what I would prefer to call it - a Gap and Close. Technical indicators on the hourly SPY chart clearly shows a sputtering, perhaps expected from such a sharp rise over the last two days. So, in a Gap and Close, two common outcomes are either, a bullish reopening of the gap by ensuing price action or a bearish confirmation of the gap to remain closed.
Here is the more interesting part:
On the daily chart, the outcome is a rare candlestick pattern formed, called the Meeting Lines, and in this case, qualifies as a Bearish Meeting Line candlestick pattern, especially when it closed the gap precisely to meet at 419.99, at the apparent top of an uptrend. This is a presumed bearish reversal pattern, and requires a confirmation candle on Friday... yes, Friday, the end of the seemingly bullish week, the last day to determine the week's candle. Daily technical indicators are still territorially bullish but some waning signs are observed with the RPM crossing down, and a short term bearish divergence on the MACD. Furthermore, the volume (8MA, purple line) did not significantly increase nor trend up in support since mid-July.
So... Friday is the most indicative day.
Is the SPY going to break down (into the earlier gap range, below red support line) or find legs to bounce back and continue the bullish rally?
I would be be very cautious, given the above.
What do you think... and why?
PS. Leading indicators: JNK has a long legged doji, indicating indecision; TLT & TIP appear to have reversed.
This is an unusual highlight, but I am so excited, and you would read on to find out why...
Previously outlined, on 3 August, I played the devil's advocate and looked at a counter trend scenario. In this scenario, the SPY was still below the weekly 55EMA, and could fail to break above, then break down much further. Thing is, the weekly SPY chart is bullish as ever, and it looked possible but somewhat remote.
At the beginning of the week, there appeared to be be some stalling and indecision on the SPY daily chart (yellow circle) and, over the last two days, with less than terrible data as expected, the SPY gapped up not once but twice. On Wednesday, the gap up was huge (see left 1H chart), and the day ended with what looked like a Gap and Run. This was followed by another gap up on Thursday, albeit a smaller gap. This was the first remote indication that the rocket to the the moon was about to sputter. As the day wore on, the SPY closed the gap... and very precisely closed the gap, in what is commonly known as Fading the Gap, or what I would prefer to call it - a Gap and Close. Technical indicators on the hourly SPY chart clearly shows a sputtering, perhaps expected from such a sharp rise over the last two days. So, in a Gap and Close, two common outcomes are either, a bullish reopening of the gap by ensuing price action or a bearish confirmation of the gap to remain closed.
Here is the more interesting part:
On the daily chart, the outcome is a rare candlestick pattern formed, called the Meeting Lines, and in this case, qualifies as a Bearish Meeting Line candlestick pattern, especially when it closed the gap precisely to meet at 419.99, at the apparent top of an uptrend. This is a presumed bearish reversal pattern, and requires a confirmation candle on Friday... yes, Friday, the end of the seemingly bullish week, the last day to determine the week's candle. Daily technical indicators are still territorially bullish but some waning signs are observed with the RPM crossing down, and a short term bearish divergence on the MACD. Furthermore, the volume (8MA, purple line) did not significantly increase nor trend up in support since mid-July.
So... Friday is the most indicative day.
Is the SPY going to break down (into the earlier gap range, below red support line) or find legs to bounce back and continue the bullish rally?
I would be be very cautious, given the above.
What do you think... and why?
PS. Leading indicators: JNK has a long legged doji, indicating indecision; TLT & TIP appear to have reversed.
Note
Update that this totally did not happen, and the SPY continued to push up higher for the next two days following.
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