Markets are rebounding. I would pay attention to end of day closings. Do we form long upper wicks? Meaning rebounds are met with sellers?
Source: Wikimedia Commons
Research Brief
What our analysis found
U.S. equities have strung together a modest rebound from the volatility triggered by the Iran conflict, with the S&P 500 posting a 1.2% gain on March 16—its best session since the war began—before adding another 0.25% on March 17 to close at 6,716.09. The rally has been aided by a pullback in Brent crude, which fell 2.8% to $100.21 on March 16 and hovered around $103.14 by Wednesday morning, well off its Monday spike above $106. S&P 500 futures were up roughly 0.5% ahead of the Federal Reserve's rate decision, scheduled for 2:00 p.m. ET on March 18.
Beneath the surface, however, daily candlestick data suggest the rebounds have been contested. On March 13, the S&P 500 cash index printed an upper wick of 59.81 points versus a real body of just 41.30 points, and on March 17 the upper shadow ballooned to roughly five times the size of the candle's body (31.95 vs. 6.26 points)—a textbook long-upper-shadow formation. These patterns indicate that intraday buying was repeatedly met with selling pressure into the close, precisely the dynamic the tweet urges traders to monitor.
The critical unknown remains the FOMC announcement later Wednesday. Pre-announcement positioning and the well-documented pre-FOMC drift effect could easily override any single-candle signal. The VIX closed at 21.66 on March 17, reflecting elevated but not extreme uncertainty, and the day's final candle will not take shape until well after the Fed speaks.
Fact Check
Evidence from both sides
Supporting Evidence
March 17 candle confirms the pattern
The S&P 500 closed at 6,716.09 with an upper wick of 31.95 points versus a real body of only 6.26 points—roughly a 5-to-1 ratio—meeting the classic definition of a long upper shadow that signals late-session selling (calculated from Investing.com OHLC data).
March 10 and March 13 showed similar rejection
On March 10 the upper wick (48.52 pts) exceeded the body (15.08 pts) by more than 3×, and on March 13 the upper wick (59.81 pts) was about 1.4× the body (41.30 pts), indicating that rally attempts were faded on multiple recent sessions (Investing.com).
Standard candlestick analysis backs the interpretation
Reference material from IG.com and TradingView defines an upper wick at least twice the size of the real body as a bearish rejection signal, aligning with the tweet's caution that rebounds met with long upper wicks suggest sellers are active near session highs.
Geopolitical backdrop adds plausibility
With the Iran war still unresolved and Brent crude swinging between $100 and $106 within days, headline-driven selling into strength is a reasonable expectation, giving fundamental context to the technical pattern (AP News).
Contradicting Evidence
Wednesday's futures do not yet show the pattern
As of mid-session on March 18, S&P 500 futures (ES) displayed an upper wick of only about 6.75 points versus a lower wick of 34.00 points—an inverted profile that suggests dip-buyers, not sellers on strength, are currently dominant (calculated from Investing.com intraday OHLC).
Academic research questions candlestick predictive power
A peer-reviewed study by Marshall, Young and Rose (2007/
found that candlestick trading strategies have no statistically significant pred...
found that candlestick trading strategies have no statistically significant predictive value for major U.S. equities, and a broader survey in the Journal of Banking and Finance reached similar conclusions for developed markets (SSRN; ScienceDirect).
The Fed decision could overwhelm the signal
The FOMC announcement at 2:00 p.m. ET is a well-known volatility catalyst; research on the pre-FOMC drift anomaly shows that announcement-day price action often overrides prior technical patterns, meaning today's closing candle shape may be driven more by policy guidance than by organic supply-demand dynamics (The Hedge Fund Journal).
March 16 rebound candle was relatively clean
On the S&P 500's best day of the rebound (+1.2%), the upper wick was 30.41 points with a body of 25.01 points—a ratio of only about 1.2×—falling well short of the 2× threshold typically required to classify a bearish rejection candle, suggesting not every rebound day has been met with meaningful selling (Investing.com).
Report an Issue
Found something wrong with this article? Let us know and we'll look into it.