After today's action, it is difficult to say if the decline we are waiting for has already begun or if the consolidation period is still running.

Looking at the Sigma Whole Market Index (aggregate of 16 US indexes), we can notice an important reversal day (today). In this context, it seems that the consolidation is still alive and further upside within this bounce back is possible (upside to the horizontal green line):

Looking at our Sigma Trend Index (STI), we can notice that this index remains above the zero line, telling us the consolidation phase is not over (yet). Other indicators are in neutral territory (at '3'):

The Breadth index was unchanged (vs wednesday) while the market declined. This situation underlines that the bounce back is still alive due to positive divergence between the breradth (red line) and market price (blue line).

Conclusion:

Late day rally underlines that the consolidation period is (maybe) not over. This is not a big problem for us because at current levels, we continue to believe that current move is just a bounce back in a downtrend.

In this context, we keep our sell orders in place, and we consider current bounce back as a selling opportunity.

Current positions:   

- short 2.25x std size SPX at 1330.98 (stop loss 1354)

- 1/2 short NDX at 2565 (SL 2613)

- 1/2 short CAC at 3057 (SL 3120)

Yesterday's highs were between 2 important retracements from previous move( on NDX,SPX and CAC): betwwen 38.2% and 50%.

So, the bounce back could already be finished but it is too early to say if it is the case (50% and 61.8% retracement are still achievable).

So, for the time being, we are waiting for more clarity from the market: wait and see attitud...

Current positions:   

- short 2.25x std size SPX at 1330.98 (stop loss 1354)

- 1/2 short NDX at 2565 (SL 2613)

- 1/2 short CAC at 3057 (SL 3120)

P.S.:

We didn't change anything to our pending orders.

The Forex gives us an important warning, current rebound could already be at risk:

While markets are bouncing back like we were expecting, we notice that the Forex (eur vs usd) is under pressure, breaking previous support level.

This action underlines our view that current move is just a bounce back and that further weakness has to be expected.

As we wrote during the week-end:

"After Thursday's selloff, the market achieved a small pullback, retesting a key resistance. We believe this move could be a 4th of 1. Then we should have a lower low early next week followed by 3 to 5 days of consolidation. A sharp decline should start (3rd wave) after this consolidation."

We believe we are in this consolidation phase. It looks like the SPX could retrace between 38.2% and 61.8% of recent decline. So, the target zone for current move is 1329-1342.

Looking at the CAC40, the same retracement gives a target zone between 3060 and 3096. Nevertheless, as the CAC40 has been one of the weakest index on a ytd basis, we don't believe that 3096 is achievable in this bounce back.

It looks like 3060-3080 is more in line with CAC's internal dynamic.

Looking at our indicators, we can notice that the Sigma Trend Index (STI) is once again testing the zero line. Other indicators are neutral at '3' (1 =  oversold level, 3 = neutral, 5 = overbought level)

Looking at the Breadth Index, we can notice that the index (red line) remains in negative territory:

Conclusion:

We stick to our view that a sharp decline should occur next week.

Current position:   

- short 1.5x std size SPX at 1336.48 (stop loss 1350)

- 1/2 short SPX at 1316 (take profit at 1302)

Have a nice day,

SigmaTradingOscillator