Hi Traders,

Friday's session ended with the kind of reversal that makes you sit up. The S&P 500 E-mini futures spent most of the week ripping higher in a strong bull market. By midweek the chart was knocking on the top of the channel I have been mapping, right up near my 7580 and 7600 targets.

Then sellers showed up.

To watch this week's Chart of the Week, tap this link.

The Daily Picture Just Got Interesting

Friday's candle is shaping up as a bearish engulfing pattern (a red candle that swallows the prior day's green candle, signaling sellers took control). Futures closed below my support at 7438.5, which is the first level bulls needed to hold.

Below that, the median line of my pitchfork (the trendline tool I use to map where a stock should find buyers and sellers) sits at 7381.5. That is the next line in the sand.

If sellers push through there, the 20-day moving average is sitting very close to my 7301 level. So caution, caution, caution.

Volume on Friday was heavy on the reversal. The narrative is suddenly inflation, and a new Fed chair could absolutely shift how the committee thinks about rates from here. The market is starting to price that in.

The Weekly Could Be Worse

Zoom out to the weekly chart and the picture gets more interesting. Futures may be sporting a gravestone doji (a candle that pushes to a new high then closes near the lows of the week, often a warning sign at the top of an uptrend).

To confirm the gravestone, I need to see this entire week trade below 7362. A full week below that level is the confirmation. A single day will not do it.

If buyers step in and we rally instead, we could get a harami candle (a small inside candle that signals indecision). That setup would negate the bearishness on the weekly. So watch for either confirmation or rejection.

These are your levels. We will see what they decide to do this week.

Licia Leslie