Potential Bounce on the SPX after of CPI print
I am thinking we might get a nice bounce on the SPX regardless what the CPI print is. If CPI comes in better than expected, we bounce (naturally). If CPI comes in worst than expectation, we probably get a wash out, trap some late shorts, then bounce.
Reasons: We are potentially forming a double bottom here with a lower low (June and Oct), the orange zone should act as a support area and it is also between the 0.5-0.618 retracement of the COVID bull market. It appears that we are about to break below the 30 Sep bottom, but the RSI is significantly higher, a bullish RSI divergence in play. Finally looking at the breadth (stocks above 50D average), we are again as oversold as June 2022 and the very bottom of the COVID crash. At such oversold level, any kind of "good news" would get us a decent bounce. Needless to say, the sentiment now is extremely bearish, but it is also the perfect condition for a bear market rally.
Reasons: We are potentially forming a double bottom here with a lower low (June and Oct), the orange zone should act as a support area and it is also between the 0.5-0.618 retracement of the COVID bull market. It appears that we are about to break below the 30 Sep bottom, but the RSI is significantly higher, a bullish RSI divergence in play. Finally looking at the breadth (stocks above 50D average), we are again as oversold as June 2022 and the very bottom of the COVID crash. At such oversold level, any kind of "good news" would get us a decent bounce. Needless to say, the sentiment now is extremely bearish, but it is also the perfect condition for a bear market rally.
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