The Bounce in US Equities Has Legs
As the US indices rallied over the last few days the non-commercial futures position reported by CFTC jas rolled over to a short position for the S&P 500 as shown on the chart below. This is a big change in sentiment near term from ‘buy the dip’ to ‘sell the rise’ and it opens up the possibility of more short covering and upside in the weeks ahead. [chart courtesy investing.com]
In terms of the structure, I have made a little change to my earlier wave count for S&P 500 where wave I was considering the recent decline as wave 1 of 3 of C. I think the three series of impulsive declines are overlapping and can therefore be marked as 1-2-3-4-5 in a leading diagonal. This is wave A of the bear market in US stocks and wave B up might unfold. This fits well with the extremely negative sentiment that we are seeing in US equities and as reflected in the short position above. Wave B can retrace 38.2% of wave A up to 4100 or retest the wave 4 high near 4177. After that wave C down may unfold.