A rare 2 post day but I thought I would give a quick update since all eyes were on the FED's announcement today.
Apparently the markets did not want to hear the Fed was not going to raise rates. You see the markets hate uncertainty and the FED provided nothing today to answer the question of “whither now”. Initially the market powered higher on the release of the FED minutes but faded strongly into the close creating a very bearish shooting star candle on the SP500.
The shooting star is made up of a candle with a small lower body, little or no lower wick, and a long upper wick that is at least two times the size of the lower body. The long upper wick of the candlestick pattern indicates that the buyers drove prices up at some point during the period in which the candle was formed but encountered selling pressure which drove prices back down for the period to close near to where they opened. As this occurred in an intermediate term uptrend, the selling pressure is seen as a potential reversal sign. The longer the candle's wick the greater the potential reversal. As always, you need volume to confirm price action and we saw the number of shares traded more than 2x the average.
Because these patterns require 3 days to form and confirm, we need to see either a gap down and/or close tomorrow for a loss in order to validate the pattern and reversal signal. If that were to occur it is likely additional selling pressure would be on the immediate horizon. If not and the market powers higher, consider it a blessing and use the rally to sell into strength if you are still overweight equities.
No one knows where we go next but market action is telling us to be careful here.
Have a great evening.