The major market indices pulled back sharply in the first hours of trading today, but between 11:00 and 12:00 they began consolidating in a horizontal channel that can be seen on the ten minute chart. They powered back higher in the next hour, consolidated again and finished the session back near their highs.
The early downdraft and the subsequent bounce formed what appears to be a hammer candle on the Dow daily chart above the low this month and the rising 50 day moving average. Similar hammers or narrow opening and closing range doji candles formed on the S&P 500, the NASDAQ Composite, and the Russell 2000 Index charts.
Follow-through action or lack of it will decide if these are hammer candles that will forge a bottom and propel the indices higher, or ominous hanging man candles. The hanging man is a candle very similar to the hammer, except its real body is positioned near the upper end of the overall range and they form near tops and signal downside reversals.