SPY spent most of the day trading above its normal upward trajectory trendline. This is an alarming place for a stock to be in.
Stocks growing at faster and faster rates sets the stage for a painful retracement.
Market makers took advantage of high growth and sold large positions taking profits off the table.
This sell off may trigger more selling by retailers that have gotten spooked by the sudden drop
Stop losses may get triggered prompting more selling.
I expect to see a couple more selling momentum candles atleast as a reaction to this move.
Still this may not trigger a larger trend of bearish sentiment, but if any other bad news comes during this short period of downward pressure, it could lead to more pain ahead.
@softo Thanks, this initial candle barely puts SPY back into its normal upward trend range. So there is certainly room to recover from this with bullish momentum.
softo
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if we dip below, could we also see a recovery upward after? let's say another drop half the size?
ratchet-mint
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@softo As long as the drop is not too significant, we should see "buy the dip" mentality. keep in Fed meeting is coming up soon and they have made it a focus to tamper down enthusiasm.