The S&P 500 is in Transition on the Monthly Chart

By | October 31, 2016

The monthly chart of the S&P 500 index reveals an interesting transition in momentum that has occurred over the last four months. A strong bullish white candle formed in July which penetrated the resistance line of a horizontal channel the index had been trading in since early 2015. It was followed in August and again in September by individual doji candles. These candles have very narrow opening and closing ranges and reflect conflict between buyers and sellers, and they were followed in October by a large dark bearish candle.
This sequence of candles is similar to an eveningstar formation (with two doji candles, instead of one) and represents a transition in investor sentiment from bullishness to bearishness. The October candle closed just above the channel resistance-turned-support level, and follow-up penetration of this support that takes the index back into the channel range is required to confirm the bearish transition.

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