The bulls stage a comeback rally on Wednesday but S&P futures are back in the tank this morning down -40 points. The SPX daily chart, which resembles a bowl of spaghetti, wants to move higher so there must be additional negative news chatter that has created the downward move in stocks since mid-August. The move is exhausted technically in the daily time frame unless any news is extremely negative that would cause another adjustment but if that happens it would only delay the bottom by a few days.
Price bounces off the possie d (green lines). The positive divergence across all the chart indicators shows that the down move is exhausted and the SPX is fueled-up ready for a rally in the daily time frame. The green falling wedge pattern is bullish and price begins to poke up and out. The oversold conditions are bullish.
The Aroon shows the bears (red line) at maximum euphoria believing the negativity will continue forever at 96% and likewise, the bulls (green line) are in the basement agreeing that stocks will remain bearish forever. Of course, when the boat is fully loaded to one side, in this case everyone uber bearish, price will move the opposite way (a rally).
In mid-August the bulls were euphoric at 100% on the Aroon while the bears were at 0% and stocks collapse. In June, like now, the Aroon bears were euphoric at 100% while the bulls were at 0% and the summer rally started.
Price is extended to the downside below the moving average ribbon requiring a mean reversion higher (price is under the 20-day MA that is under the 50-day MA that is under the 200-day MA; the blue stars).
The lower standard deviation band is violated so a move back to the middle band, which is also the 20-day MA, at 3879, and dropping sharply, is on the table.
The SPX daily chart is positive for a rally in the days ahead but the negative news may have a different plan today. If the technicals prevail, stocks will rally today and begin establishing a more solid up move, in the daily time frame, that will cause some shorts to panic and cover creating more bull fuel.
The SPX 2-hour chart is constructive and wanting to see more upside in the hourly time frame agreeing with the daily time frame so it is counter to the short-term technicals to see the S&P futures in the toilet at -40 points. Check that, now down -52 points giving up much of yesterday's gains. 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.
Note Added Friday Morning, 9/30/22, at 6:06 AM EST: Utilities collapse yesterday taking the stock market down the rabbit hole. The SPX loses 79 points, -2.1%, to 3640, reversing the prior day's rally. Price continues printing matching or lower lows so the chart indicators can be reviewed to see if possie d is still in play. Fed members were waving hawkish swords yesterday tanking stocks. The RSI remains positively diverged ready for the SPX to rally going forward on the daily basis. Ditto the histo, and stochastics. Both the money flow and MACD line, however, print slightly lower lows on the negative news, giving up their possie d for a weak and bleak position. This behavior will likely create a jog move; up one day, maybe today, then down again, maybe Monday, and on that matching or lower low in price, the indicators will all be possie d again and the rally on the daily chart should begin. The negative news events every day or every couple days for the last month will not permit stocks to rally even though technicals want to see a relief rally. The expectation remains that stocks should begin a rally on the daily basis beginning at any time as long as the negative news flow subsides.
Note Added Wednesday Morning, 10/5/22, at 8:51 AM EST: The US stock market stages the biggest 2-day rally in 2-1/2 years. The SPX jumps from 3584 on Friday, 9/30/22, to 3792 yesterday, a gain of 208 big points, +5.8%. The Dow leaps from 28715 on Friday 9/30/22, to 30325 yesterday, a gain of 1610 points, +5.6%.
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