It's a pity that there was no follow-through to the Key Reversal Day on Friday, and pattern of single up day holds very well. Since it was Friday and the selling-off near the market close was very sharp, and the market closed at the low of the day, it might be an overreaction (http://quantifiableedges.blogspot.com/2008_10_01_archive.html first two articles), and the Monday may not be very bad. You may remember that on Oct 17th the market also sold off near market close before the weekend, and then rallied significantly on Oct 20th. Even if the market plunged on Monday, it might not be so terrible because the 2.4.2 NYSE - Issues Advancing is oversold.
On 0.0.3 SPX Intermediate-term Trading Signals there are several positive divergence which could be the last hope for the bulls. In this weekend I did a research on rallies potentially caused by these positive divergences, and the result is not promising. Unless the market is at a many-year bottom, very likely these divergences would only cause the rally to the starting point of November -- if we could ever see a rally -- for SPX, it is about 1000.
Conclusion: hopefully bulls who were trapped at 1000 could get out, but I have no idea if the Thursday low is a beginning of a tradable rally.
Firstly take a look at the oversold NYSE - Issues Advancing, and see how long the delay could be before a rally. In the worst case (3 days of delay like what happened in October), long at Friday close should be able to get out.
0.0.2 SPY Short-term Trading Signals. Take a look at oversold short-term signals. Besides NYADV is oversold, VIX also breaks out ENV on Friday. By the way, the potential target of bulls is 95.53 which looks a bit tough, but you never know. If the intraday high by next Tuesday could be higher than 95.53, the situation will look fine enough.
1.0.4 S&P 500 SPDRs (SPY 15 min). The pattern looks like a double top, and the potential target is almost the Thursday low. But maybe it's not that bad.
1.5.0 Shanghai Stock Exchange Composite Index (Daily). Some readers ask whether it's time to get in the Chinese stock market. Frankly speaking, I have no idea. On the chart, RSI is overbought, STO reaches a level where the rally were rejected many times by the 50-day moving average. Also consider the descending channel and the resistance around 2000, the market should be due for a pullback, and then we can see if it can break the 50-day moving average.
Following is the research result on mid-term positive divergence.
0.0.3 SPX Intermediate-term Trading Signals, many positive divergence.
2.4.7 NYSE Advance-Decline Volume, obvious positive divergence on Breadth.
8.0.8 SPX and MA200 in 2000-2003 Bear Market. Let's take a look at how those positive divergences played out in 2000 Bear Market. Conclusion, except for the last pullback in 2003 (note that it was a higher low, which is different from the lower low at the time being) other positive divergences indeed caused rally but no rally formed a higher high. So don't expect too much to the positive divergence on the mid-term signals. On the other hand, I am not saying there won't be a year end rally. On the chart 8.0.8, 200-day moving average are challenged many times by the bear market rally. Hereby I want to show you that my research result disrespects the positive divergence as an evidence for mid-term bullish outlook.
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