The cash S&P500 formed a downtrending day yesterday, continuing the downward price pulse that began from Monday’s high. As today’s chart shows this downward pulse is now at a 100% relationship with the move down from the high of 1576.09 set on the 11th to the low of that same day. There is also a Gann level here (at 1536).
Another interesting item today is how the price decline compares with the momentum decline. Today I show the Derivative Oscillator but the same thing can be seen in the other momentum indicators I follow. The oscillator is now at its lowest level since the mid-August low while price is much, much higher. Oftentimes when price does not follow the momentum indicator you can expect a counter-trend rally attempt – in this case it would be upwards.
On the other hand, price did not form a reversal bar or pattern yesterday. As usual it is a day of conflicting information. Has an a-b-c corrective pattern played out from the recent high? The Fibonacci ratios point that way and we did do 90 degrees down per Gann. My problem is “time”. My timing work indicates that this correction should run longer.
Therefore I am keeping my stop loss at 56.81 on the SH trade unless we go below 1536.29 today at which point I will raise it to 57.34. Bottom line: A bounce will not surprise me but I don’t think the bottom is in yet.
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