The Nasdaq weekly chart is showing a potential for more downward market action but the daily is showing a potential for retracement today.
Last Friday, the weekly chart on the Nasdaq indicated a doji, that closed on the low (very similar to a gravestone doji). This pattern typically indicates a move to the downside. This is the third candlestick combination on the weekly chart that has shown a potential move to the downside. The first one occurred (first circle in green) formed back in early February and resulted in a wide bar to the downside (magenta bar). The second pattern (green circle in the middle), evening star formation, resulted in another strong downward move the following week.
While the gravestone doji is typically read at the top of markets, this one may hold if the current bar continues to be a bearish bar. However, the daily chart is showing the market is oversold from yesterday's run down.
With the daily chart approaching the oversold levels, the market could push down at the opening, only to retrace later in the day. However, the weekly chart pattern will continue to be issue if the current pattern continues for the remainder of the week. If the close for this week is under the gravestone doji that was formed last week, the market will likely move lower.
Additionally, on May 2nd, the FOMC will release the FOMC Statement and Federal Funds Rate at 2 pm Eastern Time. Although the CME FedWatch Tool currently indicates a 95.3% probability of the rate remaining the same, is the current downward market movement a pre-cursor to the reaction to the upcoming FOMC statement or are investors really just pessimistic over the current earning reports?
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