Building a Bottom?

Thursday saw an “uptrending” day on the cash S&P500. The Candlestick was a “white opening Marubozu” which; by itself, has a bullish indication. Furthermore, yesterday’s candle can also be interpreted as a “Gravestone” and has a bullish interpretation when found in a downtrend; more so since it follows some spinning tops.

The candles are buoyed this morning by a technical “buy” signal that was flashed at the close yesterday when both the RSI and Composite Index turned up with bullish divergence now in place between the two indicators (see chart). So does all of this mean that the low is in? No. It means that the chances of a low here have increased. If the low isn’t in I think it will be made above 1285.

What would convince me more that the bottom is in (and that the impulse pattern from May 19 is complete) would be a positive breaking of the downtrend line drawn on today’s chart. Hard to see is the short moving average which is now overlaying that downtrend line. Add a Fibonacci grid and you have a lot of resistance at 1335-37 today.

I suspect the cash S&P500 will have to “back and fill” for a few sessions before much upside progress is made. Finally, let’s play a “what if” scenario. What if the low is in? I think the bounce will be over by July 15 but at least would reach for the 1370 level. I will worry about more precise targets once I have a better feel that the low is in.