The hammer candlestick printed today on the close is a pretty good hint that the market is ready to bounce up now. The question is how many days will it be able to do so.
It would seem a bit unusual for the market to close higher tomorrow given we have the jobs number in the morning and it is the Friday before the long holiday weekend. But maybe the market does not care about that and maybe there will be enough short covering tomorrow to close the market strongly higher perhaps in the 1050 to 1070 range. To keep the bearish acceleration scenario intact I really would not want to see any higher than that.
Maybe the market will tread higher tomorrow and Tuesday after the holiday weekend? One might assume that those two days could be very low volume days which would fit nicely in the overall pattern.
There is lots of downward momentum right now and I doubt that this rally will last more than one or two days but I could be wrong. We are hugging the lower bollinger band right now as well and could rally right up to the midline. This is exactly what happened in 1987 before the big fall.
I should also say that the recent decline although quite persistent has been lacking somewhat in the blockbuster volumes (for example like the May 6, 2010 volume) necessary to keep the trend going down with enough force.
So a one or two day rally could get us right back up to resistance and then build a bit more cause for a resumed move down again.
Sometimes reversal hammer candlesticks fail and price just keeps going. During the up move of March 2009 to April, 2010 there were plenty of reversal hammer candlesticks that failed. I doubt that will happen tomorrow and Tuesday of next week but lets see how high the market is able to bounce.
I still see 950 as the ideal intermediate term target perhaps by mid July or slightly sooner.