The current upward retracement looks corrective so far which bodes well for the bears. Absent of a lower low today, anything higher than S&P 500 (SPX) 1569 shifts the probability that some other pattern is at hand. As far as initial downside targets are concerned, the 3% level from the 1573.66 top is what I’m watching carefully. The 3% level is at SPX 1526.45. The last drawdown had an exact 3% drawdown which I suspect big bank equity strategists had a hand in this. Considering the 3% level is the cusp of the definition of a normal pullback which happens to coincide near the 50 day moving average currently at 1530, it makes for a good starter target. The SPX 1530 area is also a 50% Fibonacci retracement from the 1488 low to the 1573 top. If some DeMark and wave patterns can concur with this target, then a larger degree bounce will be in store.
There has been some noise on Gold lately as the whole metal complex is searching for a bottom. From a DeMark perspective, SPDR Gold (GLD) has been been tracking fairly well since the beginning of the year. Currently, GLD is running on bar 8 of its TD Buy Setup but there are some questions. GLD will likely finalize bar 9 tomorrow but only after taking out the TDST support at 151.40. This is suggesting that any reversal will be temporary and GLD will eventually continue down. But I can still make a case for a good tradeable bounce. Any breach of the TDST level during a TD Setup counts 1-4 is more powerful than a breach from counts 7-9. Also, GLD appears to be wrapping up a fifth wave down. Looking at the Gold futures chart, the DeMark count there is already at 9 so perhaps any closing candlestick pattern there can dictate what GLD might do in the future. It’s not perfect buy setup and it may not be the final low but there may be enough of an upward bounce to alleviate the negative sentiment.
The market has enough oversold sentiment and micro waves down to call for an retracement but the overall bias is still for more downside. Tomorrow’s US jobs number occurring at the end of the week should provide more volatility. (updated mid trading session)