The 09/01/22 blog “Day of Decision -09-02-22” illustrated that The S&P 500 (SPX) 09/01/22 bottom was made without an hourly RSI bullish divergence.
The hourly SPX chart courtesy of Trading View updates the action of the RSI indicator.
On 09/06/22 the SPX broke below the 09/01/22 bottom. It also marginally broke below the rising trendline from the 06/17/22 bottom and the Fibonacci .618 retracement of the rally from 06/17/22 to 08/16/22. The breaks were small and within reasonable leeway.
It also created a significant bullish RSI divergence.
Also note that the RSI high on 09/07/22 was above the level recorded on 09/02/22. This implies that soon price could be above the 09/002/22 high.
The daily SPX chart reveals some fascinating sentiment data.
The Market Vane Corporation polls Futures traders from various markets. The polling data derives a Bullish Consensus reading. High percentage reading come near market tops, low readings near bottoms. Divergent readings can also signal potential turns.
For the SPX bull market that began in March 2020 the lowest reading came on 03/24/20 at 28%. The SPX crash bottom was 03/23/20.
The highest SPX bull market reading was 68% on 11/02/21. The reading at the SPX all-time high on 01/04/22 was 67%.
Note that just before the SPX 2022 bottom on 06/17/22 the reading was 41%. The SPX bullish consensus reading for the week of 08/29/22 to 09/02/22 was 35% a significant divergence.
The relatively low reading of 35% and the divergence implies excessive bearishness.
If the SPX 09/06/22 bottom is not broken, there’s a high probability that a multi-week rally may have begun.