A strong uptrending price bar was the result of holiday-shortened trading in the cash S&P500 last Friday. The one day downward price pulse from the 11/20 high ended at the 11/21 low and we have a new upward price pulse developing from that point. Friday was also day 2 of a Snap-Back Reversal Day pattern. Although many are always suspicious of making much of the post-Thanksgiving Friday action (due to the usual dramatic drop in volume) I must still tackle the problem stated over the weekend of “whether or not we have just have ended the “c” wave of [the] correction.”
The first item of note is that since we turned upwards on Friday we have confirmed bullish divergence between price and the RSI indicator in the target zone identified on the weekend post of November 10-11 (1413-1417). The possibility that we might have just completed a Terminal Impulse pattern also remains. This “terminal” pattern, also known as an “Ending Diagonal”, would (if that were truly the correct count) be a larger "c" wave and complete the correction that began at the July high.
A negative is that the market can’t afford to hesitate (turn down on a daily closing basis) here or negative reversals would form in the RSI. Another huge concern is that the positive reversals on the weekly chart have been negated and that time frame remains on a technical “sell” signal.
I guess what swings the argument to “bullish” for me is that the DeMarker Indicator (shown on today’s chart) says we should be looking for a bottom here. Look for bottoms when the indicator goes below 0.3. Doesn’t mean we will get one but that the odds favor bullishness. Bottom Line: I will go long the SPY on any move above 144.35. Initial stop will be at 141.66.
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