Click on Chart to Enlarge The 60 min chart of SPY and SPX is showing the most overbought levels since the April highs. This is happening well under resistance, however today marked a bullish MACD cross on the daily chart after a strong bullish divergence and many signs of pessimism good enough for a rally. Also the gap at 107.50 on SPY was closed above today. Ideally if the downtrend were to continue I would prefer to see the gap filled and then reverse to close below it.
Click on Chart to Enlarge The 30 minute chart shows a glaring bearish divergence on the MACD. Also measures of market breadth like TICK, advancing issues, etc are showing divergence on today's new rally highs. All this I take to suggest a pullback will happen soon. However, I don't know how big to expect it to be.
Click on Chart to EnlargeThe daily chart shows the MACD bullish cross here. Bulls have to like the way this looks for a rally. And the price reversal pattern is nice as well
The weekly chart however is not showing a classic candlestick reversal, and the MACD is not even in oversold territory, so I don't know that this decline is over yet.
I may post a short-term bearish trade early next week based on this set-up, but I would be willing to exit on weakness and immediately reverse to a bullish trade if there is not a sharp sell off the suggests we will see new lows.
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