The ambiguous candlestick duo

Candlesticks have been very effective since April in signaling reversal or contiunations. But the last couple of days, there have been some ambiguous candlestick patterns.

From Wed to Friday of last week we had 3 up days. While positive for the market the combination of the patterns formed the ADVANCE BLOCK pattern, which in an uptrend signals a reversal.
This pattern was clearly affective in predicting the reversal.
Now with combine the ADVANCE BLOCK with yesterday's big down day. The market forms a LADDER TOP, which is another signal of a trend reversal.


So in the past 4 days we have 2 patterns that give us a trend reversal signal. Additional Monday gave us a Bearish engulfing pattern. Ideally a down day today would indicated the uptrend in fact had reversed. Instead we have the ambiguous candlestick pattern forming.

Here is why:
Technically what formed between Monday and today is a Bearish Thrusting pattern.
This is a rare pattern which is a bearish continuation. The reason it is a bearish thrusting is that the SPX candle failed to close above the midpoint of yesterday's candle. This is a bearish continuation pattern if the market is in a downtrend, which the overall market trend is not. If you draw a line from Friday's close to today's close well that's a downtrend. So we will need confirmation of another move down. But two trend reversals and a continuation support a move down.

Here comes another but:

The pattern also looks like a Piercing Pattern which is a reversal pattern of a downtrend and more common. It would be signaling the reversal of the downtrend from Friday to today. By definition, it has to close to above the mid-point of the priors day candle. Well it was off by .25, that's almost close enough for me. If you are looking at the SPY well then it did forming a Piercing Pattern, since it closed above the mid-point.



So we have 2 potential Bullish Reversal patterns and 1 bearish continuation pattern and 1 bearish reversal pattern. There needs to be better confirmation to give a clear signal of what the market will. If we have a down day tomorrow the Bearish Thrusting is in play and the uptrend we have could be reversed, I am leaning towards this scenario. If we have an up-day, we could continue the uptrend that has been established since March. Just some food for thought! More post later on the breadth and volume