Well, not the clearly bearish close that I was hoping for.  Actually, the price action was a bit ambiguous today.  Yes, the fact that the markets closed higher was, of course, bullish.  However, there were a few things that I mentioned earlier today that I was on the lookout for to help keep the bearish scenario alive and well that did in fact happen:

  • First off, although I’d imagine that bulls far and near were chanting “TREND DAY!” after the nice gap & go this morning, that was not the case today as the broad market (the $SPX is widely considered the broad market) peaked out around 11:20am ET, fell back to pretty much re-rest the opening lows (which by definition can not happen on a trend day) and closed well off the highs (trend days should also close near the highs).  However, the fact that the SPX did manage to still close comfortably off the day’s lows and some of the other key indices outperformed the SPX today will keep me on the sidelines for now until I see how we follow thru tomorrow and possible the rest of the week.
  • The $SPX also failed to hold above the key 1430 level after briefly taking it out earlier in the day.
  • The $COMPQ failed to hold above the key 3030 level, also after briefly taking it out earlier in the day as well.
  • The SPY put in a shooting star candlestick today (hence, the reason I was on the lookout for a reversal in prices & close near the lows in my previous post today).  As this SPY daily chart illustrates, every first counter-trend wave in over the last couple of years (with A being the market peak and B designating the subsequent counter-trend wave making a lower high and peaking just before the real selling kicked in) ended with a shooting star candlestick.  Technically, that 5/1/12 candlestick just missed the definition but matched the criteria in spirit with prices moving sharply higher earlier in the day followed by a strong reversal with prices closing near the lows.
  • Although AAPL managed to end the day with a decent gain, it also suffered from profit taking throughout the day after peaking 2 hours into the trading session.  In fact, AAPL finished the day giving back nearly 1/2 of it’s earlier gains.  The under-performance in AAPL on the latest bounce continues to be a red flag IMO.

Again, overall one has to call a day like today bullish as all of the key US equity indices finished positive.  However, taken in context with where we are (most likely in the final stages the “B” phase of what I’ll refer to as an A-B top) with a potentially bearish shooting star candlestick topping pattern put in place today (which we need to see downside follow-thru for confirmation), and the fact that the key indices are up against key resistance, traders/investors should be cautious on the long-side and consider raising stops or booking profits on exiting positions while a more aggressive trader with a bearish outlook might consider adding short exposure this week if the markets close below today’s lows.