Patterns. Signals. Always worth watching for technicians. When you see them you want confirmation. Today markets threw a very specific signal that is as of this writing unconfirmed, but it’s notable and worth watching as we’ve just witnessed massive up trend moves.
The signal I’m talking about here is an outside day. Sometimes referred to as an outside reversal day or a bearish engulfing candle.
Why is it important? Because it could signal a change in trend about to commence. I say “could” because as I said above it’s unconfirmed at this point.
The classic definition:
Today we saw a gap up, the gap up was rejected and filled, and then new lows were made versus yesterday exceeding the entire range of yesterday. And $SPX saw a close below yesterday’s close of 2907.
If this signals a trend change the classic signal suggests something like this:
Here are some examples of indices that printed outside days today:
Note the last time we had outside days was at the beginning of March which led to another 4 down days, but did not change the overall trend, but offered a sizable dip.
Again: The signal is there, but it remains unconfirmed. As this market tends to gap up day after day it may just as well be invalidated by tomorrow morning. But nevertheless there it is.
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Categories: Market Analysis