SPY Gaps Into Resistance, Forms Bearish Engulfing

The SPY (SPY) gapped up into what looked like an exhaustion gap pattern and began its descent lower all day, completely engulfing the ‘hanging man’ candle that formed yesterday.  Let’s take a quick look at this action.

It’s almost comical now to declare any sort of bearish technical (or fundamental) pattern because the market has completely ignored them - from confluence Fibonacci levels, negative breadth, volume, and momentum divergences, EMA resistance, etc.  So take this as it is - a bearish ‘classical’ technical analysis signal.

On Wednesday’s action, price formed a “hanging man” candle (bearish) after forming a doji (reversal) the prior day.  Shrugging that off, bulls gapped up the SPY (and stock market) this morning… but they met resistance immediately.  With an hour to go before the close, a Bearish Engulfing pattern has formed, as bears have completely stripped away the range of yesterday.  Closing beneath yesterday’s low would also trigger a ‘key reversal’ pattern (similar to the engulfing).

We’re also coming into resistance via the January highs and the 200 day SMA which is just above price.

I wanted to point this out to you as a quick update.  Should the pattern hold, the first line of support would be the $87.50 level, which was the February highs and also the current 20 day EMA.

Subscribe by RSS Subscribe by Email