After Tuesday’s sell off, someone had tied a link chain around the bull’s neck and then padlocked it.
However, and in line with the investors who buy every dip, today, those angels of the market came back in to rescue our invested dollars.
With Tuesday’s nasty, huge red bearish candlestick formations (a Japanese method of tracking the high low and close of tradeable instruments), today many of those instruments traded inside the bearish candle’s range.
For instance, our two premier “go to’s”-Transportation (IYT) and the Russell 2000 (IWM), both had classic “inside days.”
Inside days, especially after an unusually big trading range day, is interpreted as a “pause” in the action.
Inside days represent investor uncertainty.
The good news is that with inside days, the reversal tops the market potentially put in yesterday, have yet to confirm as a true top today.
If that’s the good news, then what is the potential bad news?
Should Thursday turn out to be a red day and we close below Tuesday’s lows, then like the song, There Must Be an Angel by the Eurythmics, “Could this be reactivating, all my senses dislocating…,” the market will not be out of the woods.
In last night’s Daily, I laid out 5 different chart indicators to signal a top.
After a blow off top, with a potential reversal pattern accompanied by a huge trading range and better than average daily volume, an inside day might still signal a top. If..
On day 3, the instrument breaks the lows of Day 1.
So, should IWM fail and close below 155.80 (Tuesday’s low) on Thursday, expect more selling.
If IYT fails and closes below 201.63 (Tuesday’s low), then same expectation. Sellers will show up.
On the other hand, should IWM clear 159.41 (the all-time high) or IYT clear 206.73 (ATH), then the bulls will instead be singing,
“No one on earth could feel like this
I’m thrown and overflown with bliss”
Thursday at 5 EST, I am presenting at the Wealth365 Summit. To register for my free webinar, please click here.
S&P 500 (SPY) Inside day. 276.18-280.09 the range to break
Russell 2000 (IWM) Inside day. 155.80-159.41 the range to break
Dow (DIA) The only index that did not have an inside day and instead, went to new highs. A possible clue for tomorrow.
Nasdaq (QQQ) Inside day. 163.53-166.41 the range to break one way or another