Chart of the Day - Tuesday, October 4th, 2022

Today’s Chart of the Day was shared by David Zarling (@AdaptivCharts). It's a 1-hour candlestick chart of the S&P 500 year-to-date. David points out that the S&P 500 has stranded the bears on a deserted island. We're talking about a bullish island reversal pattern. This pattern is formed with two gaps that leave a cluster, or island, of isolated price action. In this case, price gapped lower on Sept. 22nd and chopped around for the next six days before gapping higher this morning. You could also call this a failed breakdown, given that we've reclaimed the June lows. Call it whatever you want...an island reversal, failed breakdown, bear trap, whatever! The point is, the S&P 500 is set up for a sharp countertrend rally in the near term. Don't let the silly names fool you, there is a lot of market psychology behind these chart patterns.