Chart 1 below of a few weeks of action on the S&P 500 illustrates my concern. Last Friday the market had a huge down day, the one marked on my chart as "engulfing candle?".

Usually, a huge red candle like Friday's after a several-weeks pullback signals a possible reversal in the opposite direction (North). But engulfing is as engulfing does. For that hoped-for reversal to happen, a series of rising white (positive candles) would be needed. The close of one of those white candles above the top of the engulfing candle would be the money candle! Note what happened at the August, September and November lows in the uptrend: engulfing candles followed by a series of up candles (the market went up):

Now, let's turn attention to the three candles following Friday's big red. Two advancing candles and then the long shadow. Today's candle made a very long upper shadow than fell back to close almost at the day's open, which indicates weakness. This could very likely be the "shooting star" pattern, which is bearish. These often show at the end of a move up. Is two white candles in a row enough of a move up to call this 3-candle pattern a shooting star?

We'll soon know.

I don't trade these candlestick patterns. I'm just trying to size what up is happening. I don't know what's next, anymore than you do, but price and volume are all we have.

Covered Calls and Naked Puts

Candlestick analysis is by no means foolproof. To paraphrase Ebeneezer Scrooge, they show us what may be, not what will be. But for now, unless and until we see more up candles and a close above Friday's big red (which could also be a close above the 20-day moving average and back into the primary trend), there will be no entry signal for those who trade with the market.

Do not put on a covered call or naked put position now. Even if you are eying a stock that sneers at the market, its behavior could change if the market heads south.