Although S&P has given a short-term sell signal after the NFP announcement, the decline is not a convincing one. The decline is not impulsive and not deep enough after two days from the latest all time high. The decline from the recent all time highs is overlapping and thus corrective. In previous analysis I mentioned how divergencies in the RSI are making me feel uncomfortable with long positions at this point. I continue to feel that bulls have more to lose than bears. However, with the first part of the downward correction most probably over at 1867, I believe yesterday we completed the second out of three parts of the downward correction. I anticipate now a lower low towards 1850-60 to complete the correction.
The reversal on last Friday has given us the sell signal. The form and pattern of the decline makes me think that bulls still have the upper hand and they are going to support this market even if it pushes lower towards 1850. The decline nearly made it to the 38% Fibonacci retracement. If the initial part of the decline cannot break through the 38% retracement, we cannot expect the final leg of the correction (if it has one more leg down) to move past 61.8% retracement. We remain bearish as long as 1883 is not broken upwards. Short-term bears could make some profits if prices break 1871 today. If short-term support at 1871 breaks we could see 1860-62 today. For longer term bears I cannot say things go their favor. Bulls show strength and there is no sign of a downward impulsive move to make us expect more downside pressures.
Concluding, long- and intermediate-term trend remain up. Short-term trend is down and we could see this downward correction complete near 1850-60 if not already complete. Breaking below 1833 will challenge intermediate-term trend and breaking below 1737 will put long-term trend in danger. As always, thank you for taking the time to catch up on my thinking.