History

On Wednesday the S&P 500 fell only 0.1%, but that was enough to run the current losing streak to three days. Moreover, there is a case to be made that the internals were more negative than the averages would suggest. Losing common stocks outpaced winners by about 10%, but downside volume outpaced upside volume by a 5:2 ratio. The S&P’s bullish percent had its biggest loss since February even as the index spent the entire day below what was the dominant uptrend line. All of this continued to increase the evidence that the post-March rally is history.

S&P Bullish Percentage


With that in mind, we can count five waves down from the peak and hourly momentum is oversold and improving. This suggests that, while lower lows are likely in the weeks ahead, a relief rally of only a few days duration may be close at hand.

Support is the 866-879 range; a breach of that range will be of tactical importance in that it will be a virtual confirmation that the index was engaged in an intermediate (3-5 month) correction. Resistance is at 956.