Stocks probe for bottom and reverse up in late day rally

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Stock index started off the day with a slight recover from the large sell-off yesterday, but then once again succumbed to selling pressure. You can see on the tail on the today’s candle that prices were probing into the same tail area back in mid-August, where I drew the red line. Rally attempts were met with more selling and it looked like that bar last August was going to be taken out. Then a powerful rally started in all the stock indexes, and the market, at least in this S&P example, were able to close well above that price rejection area. The market didn’t manage to recover the losses from yesterday, but the price action was still constructive. Momentum is oversold and has kinked back up, but with much divergence at this point. The candle left on the chart with today’s action does not really qualify as a bullish hammer because the tail is not long enough and the head is a bit too large, but it still implies the same concept of a probe lower and price rejection. Trends are still obviously lower so rallies may not have much follow-through, but prices may try to work their way back up into the declining moving average lines (the blue lines) which could be a trade-able bounce. If prices should work their way back below the that red line then the bounce ideas would be negated. The market is quite oversold with much negative sentiment. Some bounce here seems logical and overdue.

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