Friday 03/16 close:  2752 – Friday 03/23 close: 2588!  The bulls are crying: “Enough!”, and they must be heard because, as the title suggests, an oversold bounce should come as early as Monday. The cycles which predicted this decline are being validated (present tense) because there should be more to come. This will be an oversold bounce which is not even governed by a cycle low, but by structure and by positive divergence in the hourly indicators. The next cycle low is due on 3/29, and another a week later. After that, we could have a decent rally (in a downtrend) with the correction most likely ending in May in conjunction with the bottoming of the 40-wk cycle.

Because of the congestion pattern which was created across the 2760 level over the past month, the P&F chart has given us a potential count which has been mostly filled for the current cycle phase, but a little more remains on the downside which should be completed over the next week or so. After that time, we should get an idea of how much of a rally we could achieve before the 40-wk cycle pressures the market into the final phase of this correction.

Chart Analysis  (These charts and subsequent ones courtesy of QCharts)

SPX daily chart

A week ago Friday, SPX closed on a support level consisting of trend lines and MAs. On Monday, the index broke below that level and after hesitating for a couple of days, decided to fall apart. Thursday and Friday were particularly brutal with respective adjunct declines of 70 and 42 points. The 3/02 low of 2647 held prices for less than two hours before giving way, and by Friday’s close, we had arrived at the support which had previously contained the first price avalanche on 2/09: the 200-DMA and the intermediate trend line from 1810.  Reaching that level, and the fact that we are very oversold with hourly indicators showing good positive divergence, besides having probably completed a 5-wave structure from our last rest stop high of 2739, strongly indicates that an imminent bounce is coming. But that support is not expected to hold for very long because some cycles will be bottoming over the next week or 10 days, and this should cause the index to move a little lower and complete the projection count accrued for this phase of the decline. But considering the near-term conditions at Friday’s close, it’s likely that we will first have a bounce.