The first thing is to remember is that we should get a bounce out of the half cycle low. Since we still haven’t seen a heavy selling on strength day that bounce may be powerful. One may want to cover shorts into the bottom of this half cycle just in case this ends up being a short term pullback to be followed by another move higher into that 1120 level we’ve been watching.

The first thing I will point out is the gap on the SPY chart at about 107.50. It’s probably a pretty good bet that gap will get filled. Also every half and full cycle low recently has at least tagged the lower Bollinger band and managed to push the 5 day RSI into oversold levels. Since I think this is going to be an intermediate degree decline the odds are probably good that we will see similar oversold levels. Actually we should see slightly more severe oversold  levels since this should be a higher degree low.

Gary

www.garyscommonsense.blogspot.com

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