The ongoing bounce/consolidation in the cash SP500 was given a warning blow yesterday when the Composite Index (middle pane) bearishly diverged with the RSI (top pane). This divergence warning is not foolproof; but when combined with the conclusions reached from the weekly analysis it seems likely that the downtrend is close to resuming.
While we watch for other confirming evidence that the bounce is complete, keep in mind that we are now in a delta pulse. Not only is Delta usually the strongest upward pulse in a cycle, it is the primary place where divergences of the sort just mentioned are prone to fail. Nevertheless, if this delta pulse turns out not to be stronger than the preceding alpha it is another bearish warning. The next upside target area is 1245-47. It is interesting to note that at this level delta will equal alpha in length.
Bottom Line: I think the bounce/consolidation from the August low is running out of steam. A break of 1136.07 will convince me that the downtrend has resumed. My mechanical allocation mix meter is at +50%.
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