MOMENTUM AND BREADTH ARE HOLDING THE KEY
Visible improvement of:
- The McClellan Oscillator: Positive Divergence + yesterday's eod print above the Zero line.
- Daily momentum indicators: Positive Divergence of both RSI (In addition of having broken its trend line resistance off the August peak) and Stochastic. Now if a larger rebound is in progress the RSI has to cross above the 50 line.
Is increasing the probability that the down leg off the August high was concluded on August 28, hence instead of a consolidation which was suggesting to me a likely continuation pattern with a pending down leg with a target in the range 1617 - 1600, price may have been forming a base which is opening the door to a wave (B) multi day/week rebound with a potential target in the range 1668 - 1685.
Since no major resistance has been reclaimed yet by the bulls (the first one is to close the gap at 1656.78) and we have a major risk event tomorrow with NFP release it is still premature to have confidence in such an outcome, but, if on any pullback the 10 d ma = 1645 is not breached one again then despite there is a huge resistance in the area of 1661 - 1662 ( 20 & 50 dma) we could see a move towards 1669 - 1685.39 (0.5 Retracement - Gap fill), provided that the McClellan Oscillators remains above the Zero line.
Therefore despite we have a visible improvement that can favour the short-term bullish case it needs to be confirmed on a weekly basis (After the price reaction to tomorrow's NFP)
So far the weekly chart is improving:
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The trend line off the November low has not been breached.
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The weekly candlestick (Harami).
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Having recovered above the 20 wma.
But as of today there is no guarantee that a better-looking weekly picture will be maintained at the close tomorrow.
