Market (SPY) printed a higher relative volume spinning top candle today. On Emini S&P (ES) futures chart, the candle looks hammer-like when you consider the overnight session which includes Asian and European trading. The Low of this hammer tested the drawn 127% fibonacci extension to the tick. Also the price bounced off the 200 day SMA (lower blue curve), and this price region was the support area during June.
My interpretation of this candle is that higher volume points to important support here. I expect the price to bounce from here. Now this bounce can be just a retracement and last a few days or it can be a reversal. Another possibility is that price hangs out here for a while before deciding which way to move next. And the third possibility is that price can just rip through this support completing the widely mentioned head and shoulders pattern and drop hard, though the likelihood of that happening is less than the two scenarios mentioned earlier, again that is pointed to be the volume and candle type. Also when everyone is talking about a head and shoulders pattern, its chances of materializing decrease.
Moreover, NASDAQ 100 (QQQ) printed a higher relative volume inverted hammer which again signals a bounce and it closed higher than 2 previous swing lows. As I mentioned in previous posts, this is most likely because 4 (AAPL, GOOG, MSFT, AMZN) of the 10 highest weightage stocks in the index are in strong uptrend.
Considering a broader perspective, the weekly candle hints at continuing down move, though it closed off the lows. Since, the month is also over, the monthly candle is a lower relative volume inverted hammer-like, which followed a higher volume hammer. This combination suggests higher chances of reversal than continuation to the down side.
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