By my definition, and yours will most certainly differ, today qualifies as a pause day. For me a pause day in a rally is a day where the Dow closes up or down by about 50pts. But…
Today’s action produced a red Hanging Man candle on the $SPX. I say red because these type of candles can come in red or green but the red candle is the more bearish of the two. Still, it’s just a candle until it gets confirmed. Should this candle get confirmed tomorrow, then it could lead to a reversal in this rally. Over the weekend I wrote about how markets reveal themselves in pull backs and we might just be setting up for a reversal now. However, I’m not really seeing it. Maybe that will change tomorrow but for now I think we get a bit more upside and maybe even a follow-through day before we pull back. But what do I know?
Edit about 10mins later: Okay, well I should have looked at everything before I began today’s post.
Anyway, today’s candle could have more meaning than I at first was willing to give it and that’s because of the P/C Ratio. I use the total P/C Ratio and it closed today at 0.63. That is the lowest reading this year. We had readings close to this at the March high and the September highs, but we have not had a reading this low in a long, long time. This means that no one was worried at all by today’s little give back and that everyone has moved onto the same side of the ship. This is never good and is a red flag. While I am normally skittish and paranoid, I’m more so right now. Let’s just see how it goes tomorrow.
Just watch that tomorrow $SPX does not close below today’s low because that is the tell.
GL and be careful.