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SP500: Bulls are Raging Back

Brief update:

Yesterday's broad based rally has put a dent in the bearish scenario.

60 minute time frame:

  • The decline from the May high can only be counted as a 3-wave down leg (ABC = corrective pattern)
  • If the assumed Ending Diagonal was completed at the May high it should have been followed by a sharp (Impulsive) decline. It has not been the case.
  • Therefore going forward now the odds of another shot at new all time high are fairly large.
  • Today given the extremely low reading of the equity put/call ratio (contrarian indicator) a pullback is likely but if bulls manage to achieve an Inside Day and the support range 2100-2094 holds then the odds that SP500 has established a swing bottom at Tuesday's lod would substantially increases

SPX 60-Minute Chart
Larger Image

  • Obviously a breadth thrust is needed hence we will have to monitor the McClellan Oscillator. On Tuesday it tested the Oversold line. Yesterday breadth was strong (Initial breadth thrust?). Going forward if the McClellan Oscillator moves toward the Zero line it will lead to higher prices

NYSE McClellan Oscillator Chart

  • If there is follow-through in the breadth thrust the weekly stochastic of the NYSE Summation Index should trigger a new buy signal (It is extremely oversold)

NYSE Summation Index Chart

Weekly time frame:

  • Maybe an Ending pattern is still a valid scenario
  • If the 27 wma = 2079 holds and the 10 wma = 2109 is reclaimed then maybe the last wave of a potential Ending Diagonal would be underway

SPX Weekly Ending Diagonal Chart
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