The stock market failed to hang onto hefty gains today after a multi-week rally. Has the leg up exhausted itself? Today proved to be a one day bearish candlestick pattern for the markets. It's a classic pattern of higher prices that failed to hold by day's end. See chart below:
Sometimes you see a few of these one day candlesticks before a move has finished. That being said, this is exactly the type of candlestick I've been waiting for as I still believe, as I've written before, we get some form of a top in the end of March or April. What I'm looking at for better confirmation? The 3 simple things are as follows:
- The daily MACD to roll over, almost but not quite.
- The market to break below its up trend line (1158). Only 7 points!
- The market to break below its prior peak (1151). Only 14 points!
It's still very feasible the market hits the up trend line and bounces into one more high for this leg, and that's why I want to see the above. It doesn't take much downside price action to satisfy all three. Also, I'd like to see some kind of small topping pattern, not a must, but would be nice.
I'm by no means calling the top in the entire move up from the 2009 low because that's too early, and more price data is need. I do believe the markets are ready for some kind of correctional behavior, and if the weekly MACD rolls over with the daily which I expect because it's at over bought levels, the correction might have more teeth in price and/or time. These are all things to watch in the near term.
Hope all is well.
