ajtj99's Market Pulse

[ajtj99]

Well, that dump in the end of the day put the SPX with a weekly gravestone doji candle:

http://stockcharts.com/def/servlet/SC.web?c=$SPX,uu[g,a]wacayyay[d19990822,20030822][pb20!b50!b200!c....

Other times we've had this were the end of Jan. 2001 and the end of May 2001.

One difference this time could be the short length of the upper shadow on the stick. Furthermore, the upper shadow did not exceed the prior top of 1015 SPX, and it came after only a 3-week advance. Normally when this is a reversal stick it comes after a strong uptrend, and the upper shadow is a top.

I think the best interpretation of this candle is a test of the 1015 high that failed, resulting in a test of underlying support.

Here's the daily chart:

http://stockcharts.com/def/servlet/SC.web?c=$SPX,uu[g,a]dacayyay[pb20!b50!b200!c13!c20!c50!i!d20,2!a....

The .382 re-trace of the advance from 961 SPX is the shelf at 992. We are in the process of testing that now. Below that is the 50% re-trace level at 986, which is also a shelf.

I think after a test of the 986 level we may get a re-test of today's high.

Another possibility is this is an a-b-c-d-e correction off the June high, with a low at the .618 re-trace level around 980 followed by a surge to new highs.

This is all the bullish interpretation, of course. The bearish alternative is pretty easy to figure out.