Looks Like a Bounce Has Started

It was an “inside” day on the daily chart of the cash S&P500 yesterday. With bullish divergence between price and the RSI in place, the index was able to stabilize. At the end of the day we were able to close above the L1 PP alpha-delta trend line (shown yesterday) and so the odds are good that the initial decline from the October 21 high is complete. On a rally from here we can look at 1054 -1057 (where the Long moving average on the weekly chart sits) and then 1064-66 (daily medium and short moving averages) as initial resistance levels.

Since the break of the daily TD Supply line was not qualified yesterday, our downside TD Line targets remain 987.51 (from the weekly chart) and 979.31 (from the daily chart). Also, as a commenter noted yesterday, the sequence of TD setup days has terminated at seven. There will be no “buy” setup to worry about in the near future. In fact, a rally now will most likely provide us with our missing TD Sequential “sell” countdown bars #12 and #13.

Bottom Line: In my opinion a rally here should not be bought but rather used as an opportunity to position oneself as intermediate term bearish (particularly if a TD Sequential signal develops). I will not consider going to a long-term bearish stance unless 1019.95 is violated.