Start of A Bear Market or Normal Market Correction? A Detailed Analysis on S&P 500

Ming Jong Tey
4 min readNov 28, 2021

The black Friday selloff on 26 Nov 2021 triggered by the COVID-19 variant — Omicron was significant and certainly is a change of character in S&P 500, Dow Jones and Russell 2000. Nasdaq was the strongest despite dropping close to 2% and it still did not break the swing low support near 15900.

Daily chart of 4 US major indices

As highlighted in the daily chart above, the spread of Friday’s candle (highlighted in yellow) is easily the top 3 biggest in this year. If we focus on the up wave since 13 Oct, Friday’s bar is certainly considered as a change of character bar, which stops the uptrend from 13 Oct, at least into a trading range (or a reversal to the downside).

Price Structure Context

Context is probably the most important thing we need to look into when analyzing the chart. According to the candlestick pattern books, shooting star or bearish engulfing is bearish, right? Wrong!

If you experience in your trading journey and found that candlestick pattern only works some of the time, it is time to pay attention to the context and the volume on top of the pattern.

Let’s take a closer look at the S&P 500 daily chart below:

S&P 500 daily chart

Since 13 Oct, S&P 500 had a climatic rally bumping into overbought of the up channel. Subsequently it formed a trading range. On 22 Nov (last Monday), there was an up thrust happened where the price failed to commit above the resistance level formed by the swing high with increasing supply.

Despite on the next two days, S&P 500 did not have follow through to the downside (even formed demand tails), there were many leadership stocks such as AEHR, ASAN, BILL, DDOG, NET, TEAM, ZS, etc… experienced a steep selloff acted as a change of character on 22 Nov, as mentioned in my private Telegram post — time to be defensive.

Private Telegram Group market update

Distribution Price Targets on P&F Chart

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Ming Jong Tey

I am a Wyckoff trader who practice kaizen in trading. Get Weekly Market Outlook & Best Trading Advice straight to your inbox: https://www.tradeprecise.com/