Positive divergence suggests tradable stock market bounce ahead

As we head into opex tomorrow, a traditionally bullish time, some bullish signs do appear. In addition to positive divergence in StochRSI indicators, the McClellan Oscillator (first two charts below) show positive divergence as the S&P 500 ($SPX) has tested close to - though not on (yet) - the key 1250 level, plus its widely-watched 200-day moving average ($SPX daily chart below).

The monthly $SPX chart below has an interesting suggestion that it could backtest that downtrend fork line that it broke above, by testing near the $1220 area which would also retest a Fibonacci level. I tend to think the stock indices will head lower indeed, but that we should have a rally first. One possibility is a rally followed by down into 1249-ish, then a bigger rally perhaps retesting 1300 or 1332, before a more persistent move to yet lower levels either later this year or next year. And the Baltic Dry Index ($BDI) shown like an indicator on the $SPX chart even suggests that the economy and market might actually go really bullish. Honestly I'm in wait-and-see mode on that; we just need to remain aware of it. Especially since some sentiment indicators like the percent of bullish individual investors is relatively low (I've seen about 25%), which is a positive contrarian sign, while other indicators like bullish percent based on stocks relative to their 50-day moving averages make the markets look oversold.

Speaking of oversold, the bullish-percent chart for $SPX based on the P&F charts of its components ($BPSPX chart, second-to-last below) is stretched down with its own beginnings of positive divergence. And it's testing a support level around 60 from a prior swing high. The last chart is my $TRIN daily chart. Its moving averages are all above 1.2, which is an unusually oversold level for the stock market. Today's value closed at .88 and the $TRIN's 3-day moving average is at a lower high, which is also a type of bullish divergence.

Any KI$$ swing traders who've been short or hedged should strongly consider unwinding those positions, whether or not you want to play a bounce. For those wanting to play the long side, we need first to get confirmation on hourly charts ... and really I'd feel better if we had 1250 tested before going long, but mainly we need to see a bullish trading pattern. That hasn't happened yet. It's just that the positive divergence in the indicators is a "tell" that a good tradable rally is on the way.