We closed above 1400, the down trend line, and the price channel upper trend line. Will we be able to stay there? I think the daily SPY chart shows the candlestick pattern a little better due to the morning gaps.
That would be two shooting star candles in a row. It is a pretty rare pattern for SPY. These are just warning candles, they need confirmation to be a reversal pattern. However, they came with the market in a very over bought short term condition. We are also in an area of potential resistance with the down trend line and the 1400 round number.
Check out the 60 minute SPY chart.
Unlike the sell off late yesterday, we got a red price bar this time. This raises the odds of some follow through selling in the morning.
This rally has chased out all the weak shorts. It has also gotten a lot of bulls all excited. The question is what happens now that we are retesting the spring highs. Is this market ready to break out and race higher? The market is a kind of like a race car. It is one thing to catch the car in front of you. It is much harder to pass it. Getting back to a price we have been before is much easier then breaking out and continuing on. I think there will be significant resistance above 1400.
Check out the bullish percent chart for the NYSE.
You can see we have a huge divergence on this retest. It is a much bigger divergence then we had last summer before the crash. The small caps and transports are also lagging. This is what tops often look like. In order to break out, this market will have to consolidate around the 1400 area to work off the short term over bought condition. People are not going to push prices significantly higher without that.
Bob
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