The cash S&P500 gave back all of its gains (and then some) from Monday’s session as we formed another downtrending price bar. We will confirm the slicing through of 886 (the 23.6% Fibonacci retracement value) if we can continue to move lower today without closing above 886. This would signal that a move towards the 846 level (the 38.2% Fibonacci retracement value) is in the cards.
Today’s price action will be significant for a couple of reasons. The first is that the RSI (top pane of today’s chart) is hovering in the area where bull markets find support. If the rally from March is truly over then a break below 38 on the RSI is expected. Secondly, a move below the May 15 low of 878.94 would be further confirmation that the swing chart (the orange lines on the price chart that move in “step-wise” fashion) has turned lower for the first time since the March low. The most immediate target to the downside would be the weekly intermediate and daily long moving averages now at 861.
The answer to the question asked in yesterday’s posting seems to match my “I don’t think so …” gut feeling. It appears that the currently in-force Weekly technical sell signal (RSI/Composite divergence) and TD Sell Setup may take precedence over the Daily perfected TD Buy Setup and technical buy signal; but let’s give this a bit of time to play out.
Bottom Line: I remain bearish on equities here. Short-term I expect the 861 area to be hit.
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