The broad market took a hit in Tuesday's session. While it wasn't that bad on a percentage basis due to a rally in the final two hours of trading, important levels of support were tested or broken on the major index charts.
It is a good time to assess the recent action by taking a look at the S&P 500 index on multiple time frames.
The monthly chart of the S&P 500 depicts an interesting transition in momentum that has occurred over the last four months. The index on this time frame had been trading in a horizontal channel that began forming in early 2015, but it penetrated channel resistance this July, forming a large white or positive candle.
That was followed in August and again in September by individual doji candles, or candles with very narrow opening and closing ranges, which reflect a stalemate between buyers and sellers.
The October candle had a large dark body and closed near the low end of its range and right on the former resistance-turned-support channel top.
This sequence of candles is similar to an eveningstar reversal pattern and represents a transition in sentiment from bullishness, to a neutral state, to bearishness.