Something positive for stock market bears (even bullish bears) with negative divergence

Something happened for the stock market bears yesterday: the major indices reacted poorly to a test of important test levels. In the S&P 500 index ($SPX) that was a projection of Andre Gratian's at 1168 (see his Turning Points update, posted here yesterday), which also is a pivot level of Tony Caldaro (whose Objective Elliott Wave site is now at caldaro.wordpress.com. In the Nasdaq 100 tracking ETF (QQQQ), it was a jump over $49.53 which is the 90% retracement to the April highs. Double top resistance is one way to describe that. Doesn't meant it can't or won't be overcome. But the fast drop in the afternoon gave bears some hope that the recent choppy movements (see the $SPX hourly chart below) might have formed a bearish ending diagonal wedge. If so, it could mark either a "b" wave top, or the end of a first wave up, or the uber-bearish "wave II" scenario that presages a Prechterian "wave III" market crash. All good reasons to turn cautious. The indicators, especially including the StochRSI and McClellan Oscillator, have been displaying negative divergence. So it's the bears' turn to press their advantage. We'll see what they do with it. We do see reasons to think about an effort to regain levels after an overnight drop in the futures, but it's the bears' turn to show if that's merely a backtest before heading lower.

Don't forget there are some bullish viewpoints still. ChartsEdge has projected upward, in an adoption of a possible inversion change from a previous projection downward for this week. Tony Caldaro's primary wave count for the stock market is also bullish. But his alternative is for a "b" wave to top out and give way to a wave "c" down that should retest toward 1010 in the $SPX and maybe even 940's. That alternative is still way more bullish than the Prechterian "wave 3 of III down" market crash idea. Also don't forget other good analysts like Terry Laundry (talking about an early-to-mid-November peak) and Raymond Merriman (talking about a peak next March). What do we conclude?!

Given the negative divergence, and despite the market's very high retest tiward the April highs, I believe it's safer to assume the market will pullback or at least consolidate before another attempt to exceed the April highs. If those April highs are exceeded, then a bullish count becomes the way to go. And that may happen. We didn't get a top and roll downward last week. But the current stock market waves remind me of a certain "flat" b wave that occurred in gold over a year ago, that resulted in a massive zigzag downward "c wave". So even though I've been overly cautious recently, I think my sense of caution was early and not wrong. There's a gap in the QQQQ around $48.60 that may want to be filled, and one lower at $SPX 1105 too. We'll see if the bears can have their turn and what they can do with the market before the low time window probably around October 18 or so.

One trading approach therefore becomes, I'll look for the QQQQ to "trigger" by moving and closing under $49.53. Then I'll be and remain defensive, until either it stops me out by pushing higher again, or makes a good move to support preferable with positive divergence, hopefully right to the October 18 (or 20th? according to @PositionSizing - the "Parker" contributing to fine-tuning Terry Laundry's T Theory(Tm) projections).