The outside reversal candlestick in the technology sector on Thursday threatens a short-term peak and an intermediate-term topping pattern as volatility starts ramping up again.
*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities. As always, the use of technical and fundamental analysis is encouraged in order to fine tune entry and exit points to average seasonal trends.
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Super Simple Seasonal Portfolio
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The Markets
Stocks pulled back on Thursday as traders braced for the impact that could result from Fed Chair Jerome Powell’s comments at Jackson Hole on Friday. The S&P 500 Index ended down by nine-tenths of one percent, charting a bearish engulfing candlestick of the prior session’s move. The candlestick pattern expresses upside exhaustion of the recent rebound from the August lows, but it will be the catalyst of Friday’s Jackson Hole event that will be the final tell of whether this reflux rally following the recent volatility spike is complete. If confirmed as a short-term high, it would start to reveal a double-top pattern around the summer rally highs charted in July at 5669 and suggest the conclusion of the rising intermediate-term trend that has been under threat during this period of traditional volatility through August, September, and October. The gaps that were charted on the way down from the July 16th peak in the benchmark have all been filled, including the July 17th zone of implied resistance between 5622 and 5658. It is within this span that the high to Thursday’s outside reversal candlestick was charted. Again, Jerome Powell will present the catalyst to either cement a peak or unleash the fuel to break the barrier overhead. Either way, caution in risk assets remains appropriate, particularly while within this period of seasonal volatility and while the fundamental backdrop appears uncertain. Short-term momentum indicators have rolled over and the MACD histogram on the daily chart is no longer on the rise, threatening to result in a bearish divergence with respect to this momentum indicator ahead as the bullish intermediate-term (multi-month) trend loses its grip.
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Seasonal charts of companies reporting earnings today:
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