When the main trend of a stock index is up, multiple bullish momentum divergences usually signal an opportunity to go long. When the main trend of a stock index is down, multiple bullish momentum divergences are frequently broken. When this happens, it could open the door for more downside action.
The one – hour S&P 500 (SPX) chart courtesy of Trading View illustrates the short- term picture.
At the SPX 08/09/23 bottom there was a triple RSI – bullish divergence. Subsequently, there was a steady three- hour rally. What happened next was very bearish, in about an hour and a half the entire rally was nearly retraced. With multiple bullish momentum divergences bulls usually hold most of the gains – this time they failed.
The reason for the late session rapid decline is probably the release of the U.S. – CPI report due out at 8:30 AM- EDT – 08/10/23.
A break blow the SPX 08/09/23 bottom could open the door for a move down to support in the 4,385 – 4,410 area. A move above the SPX high at 4,499.51 could trigger a multi-day rally.
Four Dimension Trading 