This afternoon we tweeted out that: The bulls need to see strength into the close. Don’t want to finish the week with “gravestone” doji candles on the index charts.
The bulls were disappointed.
Gravestone dojis formed on the S&P 500 Index, NASDAQ Composite, and Dow Jones Industrial Average weekly charts.
A gravestone doji is a bearish reversal candle characterized by a very narrow opening and closing range situated near the bottom of its overall range. It has a long upper “wick” or shadow and little or no lower “tail” or shadow. The candle is commonly seen at the end of an uptrend, and it suggests that the bulls were in control early in the day (or in this case, the week), but the bears took control away by the end of the session.
Volume picked up today, which is another bad sign for the bull case. The S&P daily daily volume bar shows it reaching the 50 day moving average of volume for the first time since the beginning of the month. In addition, positive money flow, as represented on the accumulation/distribution graph, has been declining.
The index is retesting the 2660 level. This is the 38% Fibonacci retracement level of this year’s high/low range, and it has acted as both support and resistance in the past.
Unless this level holds next week, it looks like the S&P is headed back down to another retest of its 200 day moving average, or potentially a 5% decline from its current level, to the lows of the year.