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Bearish Shooting Star & Hanging Man Threaten Market

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Two recent bearish candlestick
patterns are concerning. Today’s shooting
star and the hanging man on February
2 came at some key resistance levels. Current technical conditions look shaky
again.

A 40-year-high in inflation and
hawkish Fed remarks sent stocks reeling this afternoon. Today’s CPI showed
inflation up 7.5% from last year and St. Louis Fed president James Bullard said
he was open to a 50-basis point hike in March and wanted to see a full
percentage point of hikes by July. This turned the market on a dime.

This reversal came at a few key
resistance levels for NASDAQ 100 (NDX): the longer-term uptrend line from the
September/October 2020 lows, the 200-day moving average and monthly pivot point
resistance around 15000 indicated by the blue dotted line.

A hanging man is a hammer
that appears at the top of an uptrend and suggests a top is near. A shooting star is an inverted hammer and often signals a reversal. It
shows that the index opened at the low then rallied smartly, but failed and
closed near the low.

The bulls are clearly on notice
and the market needs to find support here above the January lows in the yellow
box. Holding 14500 on the NDX would be encouraging and clearing the resistance
around NDX 15000 would be constructive.

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