Perhaps the most constructive aspect of the basing action over the past dozen sessions has been the ability of the RSI to hold bull market support on Friday's decline. This comes after bullish divergence between price and the RSI with a completed buy setup bar #9. Even though we closed below the short (red) moving average on Friday, that break was not confirmed on Monday. Have the bulls steadied the ship? Perhaps; but it may take a little more work before a good rally can kick off. Why? The Supply line (downsloping red dashed line) can not be qualified from here. We may need a little bit more basing action. If price can resume moving higher then the next target would be the medium (blue) moving average in the 1303 area.
Bottom Line: The allocation mix meter is at +50%. My near term scenario assumes that an intermediate term low is in and that a rally will now take us back above the 1344 level. However; I remain quite concerned that the rally high from the 2009 low was made on May 2. As such, any break below the March low of 1249.05 will cause me to lighten my position even further as the allocation meter would fall to +25%.
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