Not surprisingly, the cash S&P500 rallied on the GDP number yesterday forming an up trending price bar on the daily chart. An oversold rally has begun. The question is whether it can take us to new highs or not.The bulls will be banking on the fact that the Beta - Z trend line (on the Level 2 Price Pulse chart) held yesterday and that is where the rally launched from. The rally also came with the RSI in the area where bull markets usually find support and was at the weekly short moving average.
However, I think that the bulls are only hanging on by a thread. This may be a “last gasp”. The TD REI has now been less than -.40 for six sessions, which usually indicates that a strong downtrend has developed. A close today above 1063.26 would print TD Sequential “sell” countdown bar #12 (of the required 13).
Working Road Map: With momentum indicators having failed and two versions of the Elliott Wave count showing large patterns having possibly completed, I think the odds that a significant top is in are quite high. Still neutral (since October 9th) but looking to get bearish. Here is my best guess for what happens over the coming days: If the rally that began yesterday is destined to fail then it will do so no later than November 6. I am looking for TD Sequential and/or Combo “sell” signals on this bounce to turn me short-term bearish. When would I turn outright bearish if we just continue down? Below 1019.95.
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