The Environment Provided

Both the S&P 500 and Nasdaq Composite suffered bearish reversals on Thursday on increased trading volume and left what looks to be bearish engulfing candles for both indices for the regular session. Understand that this pattern occurring on a day that began as a rally could in some cases, mark the end of an "upturned." Does this mean the rally is over, that the top is in, or that we've just experienced a change in trend? It could...

Note the bearish engulfing candle on Thursday. Circled in red are Day Ones or in yesterday's case, potential Day Ones, circled in purple are Confirmation days. Waiting for confirmation greatly increases the probability of playing trend correctly, but as can be seen here, May confirmation to the upside came a week later for the Nasdaq Composite than it did for the S&P 500. Therefore, there was far less upside after receiving that signal if Thursday's action is ultimately confirmed. Why is April 19th, an upside Day One when we can clearly see it painted red? The indices did close lower that day. The thing is that there was a final hour upside reversal on elevated volume late in that session. The rally carried into the next day. Hence, that was our reversal day, but the next day as described above, was not counted as a day of confirmation.