SPX Daily Chart

The red arrows show the negative divergence spank downs. Price back tested the 50-day MA at 1658. 87 again yesterday but could not push above. Traders have been looking for a relief rally for the last week. Today we will see if the rally continues. A breach of the 50-day would be the first signal that the bulls are making a run higher. Note the textbook bear flag (blue lines) during the May-June sell off. Price may want to now form a similar sideways consolidation flag. A back test of the 20-day MA at 1681.69, and dropping, is a prudent expectation. The 1685 level was the strong support that held for one-month, until it didn't. The 1685 was also the neckline for the H&S that targeted 1660, which was achieved, satisfying the H&S pattern.

The stochastics are oversold but the RSI and money flow are not so it is reasonable to expect oversold levels in the future. The MACD and money flow indicators remain weak and bleak wanting to see lower lows in price after a bounce occurs. Watch the RSI 50% level to see if the bulls can receive a go signal. The H&S neck line at 1685 was not back kissed and there is also a big gap left behind at 1680-1685 that will need filled in the future. As always with gaps, is the future a few days from now, or a few years from now? The orange bars show a potential large H&S forming, that will receive a right shoulder with a recovery rally. The H&S has a head at 1710 and neckline at 1560, so 1410 would be targeted if 1560 fails but this can be discussed weeks and months ahead. A relief rally may be on tap, considering the straight drop from 1710 to 1640, 70 handles, -4.1%, but is by no means guaranteed. Bulls need to gain the 50-day MA and send the RSI above 50% to begin a rally. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.