Indicator Divergence Appearing

Looking at this morning’s chart we find the cash S&P500 just below a band of resistance from 825-845. Resistance is being provided via a confluence of Fibonacci levels (dashed horizontal lines), the 180 degree Gann target (solid horizontal line), and a favorite (the ‘long’) moving average (dark green). Is wave “c” ending at this resistance? Well ….

Yesterday’s lower close also points out the developing bearish divergence between the RSI (upper) and Composite (lower) indicators. I think that I would be tightening stops if I were a bull here.

From a time perspective; the current swing up from the March 6 low of 666 will most likely (68% chance) end by this Friday. A completion before Thursday (meaning either yesterday or today) would imply a quick move down below the March 20 low 766.20. Under our current roadmap a move below that level would trigger a bearish stance. What price action today would signal such an event? I think that either an inside price bar or a downtrending bar with a lower close would do it.

Where do we stand? Part I

Although a counter-trend (bear market) rally may have started we must remember that the higher time frame (weekly and monthly) charts are on technical "sell" signals. The attached weekly chart shows how we had bearish divergence at the all-time high. Note we did not get a buy signal on this time frame this week.

Also recall my July 2 post. At that time I laid out a roadmap that gets us to a final low in 2008. I have no reason to change that view. In that post I hypothesized that the first intermediate low would occur sometime between now and November 2007. Again, I have no reason to alter that view. How we may get to an Autumn 2007 low is the subject of Part II in this little series.