![\"Image\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202310\/20231010-JMU-01_ipq141.png\")
<\/p>\nFriday’s action was a good start.<\/p>\n
But the bulls aren’t out of the woods yet.<\/p>\n
Conditions were oversold last week. And the market got even more oversold when it gapped lower following the non-farm payrolls report on Friday morning.<\/p>\n
The S&P 500 even traded at a new low for this current decline phase.<\/p>\n
But then buyers stepped up. The market reversed.<\/p>\n
And the S&P 500 rallied more than 100 points intraday before pulling back slightly in the final hour.<\/p>\n
Just like that, the bulls recaptured the short-term momentum.<\/p>\n
There’s just one problem…<\/p>\n
October bottoms usually occur with positive divergence. And as of Friday, the daily chart of the S&P 500 doesn’t show any divergence.<\/p>\n
Take a look…<\/p>\n
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Notice how last October the S&P 500 made a lower low, but the technical momentum indicators at the bottom of the chart all made higher lows.<\/p>\n
That sort of positive divergence often occurs at the end of a decline phase and leads to the start of an intermediate-term rally phase.<\/p>\n
There also wasn’t any positive divergence at the low last week.<\/p>\n
So, while conditions are oversold enough to support a short-term bounce, we don’t have the conditions yet for a sustainable multiweek rally through the end of the year.<\/p>\n
In order to get that setup, the market needs to rally strongly enough to pull the indicators off the bottom. And that process likely started on Friday.<\/p>\n
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Free Trading Resources<\/strong><\/p>\n Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/p><\/div>\n<\/div>\n <\/p>\n Then, we need the market to dip lower again, and make a lower low, while the indicators remain above last week’s lows. That will create the same conditions as last October, where the S&P 500 rallied 600 points four months off the bottom.<\/p>\n A similar setup this time would have the S&P 500 make a lower low in the weeks ahead below 4218.<\/p>\n And, if the momentum indicators at the bottom of the chart can hold above last week’s lows, the action will create positive divergence. That will create an ideal setup for a year-end rally.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark<\/p>\n <\/p>\n![\"Signature\"](\"https:\/\/files.jeffclarktrader.com\/global\/signatures\/jeff-clark-signature.png\")
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