Bearish sentiment has picked up a lot after today’s major reversal day and for good reason, but there are some positives out there where I could see this market continue to move up. Today’s candlestick reversal reminds me of the day back in March (highlighted by arrows ) where we had a key reversal day only to move much higher over the coming weeks. I tend to think this could happen based on a few reasons, and my target is indicated by the blue line.

1. MACD is still above signal line on all major indexes. Normally there is some form of reverse divergence, indicating momentum is waning before the markets correct.

2. Higher trending 50dma and whatever is in motion tends to stay in motion

3. It’s to easy to move lower here. Everyone is expecting it.

4. No selling pressure via the market internals below.

5. Market timing system is still positive. However, the gap has been closed considerably and we could get a preliminary sell signal tomorrow if we have another down day. It wouldn’t be confirmed until Monday at the earliest, and I’m already expecting some choppy behavior and whipsaws as the markets try to hide their hand.

To conclude, I have a bullish bias right now (albeit losing steam), but my trading has been nimble and smallish position sizes. Expect the unexpected with this market, and right now I think an upside break would surprise the most.

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