The S&P 500 could be creating this week, its 3rd bearish wick (reversal pattern) in the past 6-weeks. Bearish wicks in any asset always get our attention. When they take place just below an important Fibonacci Extension Level, they really get our attention! Let’s exam what is taking shape of late.
CLICK ON CHART TO ENLARGE
Both charts above are the S&P, weekly closing prices on the left and candle sticks on the right. We applied the 161% Fibonacci extension level to the 2016 weekly closing lows/highs, in each chart. 6-weeks ago the S&P ran into the 161% level at (2), where it stopped on a dime. It spent three weeks at the at the 161% level, where it looks to have created two bearish wicks and one doji star pattern.
After hitting the 161% level at (2), the S&P has backed a small percent. While it has been soft, it could have created 3 bearish wicks out of the past 6-weeks at (3), which is just below the key Fibonacci level.
The week is far from over and the 1-year trend remains solidly up. The S&P 500 needs to close tomorrow, to determine if a 3rd weekly bearish wick in a row did take place. Bulls would not want to see the S&P close down hard tomorrow. Strong rally today/tomorrow would eliminate this weeks bearish wick.
Even though the wicks are important, all short term price action below the 161% level will be important over the next few weeks.