Daily Momentum View and Recap

Once again a chart of two momentum indicators (confirming on top and RSI in the middle) and price is presented, this time on a daily basis.

A “sell” signal was generated on July 20 (on close). At this time all three time frames (see previous two postings) were on a “sell” and the market sold off quickly. We then had a “buy” signal when bullish divergence formed between price and the RSI indicator on the close of August 1. However, with the higher time frames aligned opposite this signal only a bear market bounce was suspected, not a sustained rally. In fact the market quickly reversed and moved to new lows and formed a negative reversal in the RSI on August 3.

This negative reversal was negated the next trading day and a new “buy” signal was generated on August 6. Again this signal was aligned against the higher time frames and led to only a good bounce and was followed by yet another negative reversal on the close of August 9.

Perhaps the third time is the charm as the RSI “buy” signal generated at the close on August 16 led to a better bounce. Yet another negative reversal formed on August 27 and has yet to be negated as we begin trading today. This reversal projects, at a minimum, to 1388.58. In other words, a retest of the lows.

Finally, note how our confirming indicator (on top) is lagging on the move upwards over the past few days. With the cash S&P500 at strong Fibonacci and Gann resistance now (a second area of resistance exists higher up at 1509-1514) and my timing work showing a high imminent, now is not the time for me to get bullish.