COMPARISON
The market (S&P 500) did see a strong bounce today after the oscillator hitting the overbought level once again last Friday. Obviously, the price-action itself is much more volatile today compared to what happened in October 2016, but, the sentiment from the oscillator is showing a very similar pattern, as you can see in the chart for the SPY ETF below, with the two touches at the bottom of the oscillator's band. The full confirmation of a bullish-reversal came in late 2016 when the price closed above the falling resistance line (blue dotted). So we can perceive and prepare for a similar forecast of a confirmation of bullish-reversal after the price closing above this falling resistance line (blue dotted).
OVERALL TREND
I think this is an important moving average (weekly 50EMA) to watch to gauge the health of the intermediate to primary-term trend; it surely does have a pretty impressive resume as it has been served as strong support multiple times since 2012. Keep in mind, this is a weekly chart, it may get slightly below the level of this moving average before reversing back up. It's the rising aspect of this moving average that is important (it tells us the intermediate to primary-term uptrend is still valid and you want to give benefit of the doubt to the buyers).
MARKET'S TRAP
These uptrend supports are all-too-well lined up, and that's what the market hates the most (when most traders think they figured out the market)--the prominent level that everyone is looking and paying attention to. Most of the longer term traders and investors might be setting stops just below this uptrend's supports and plan to flip short once these uptrend supports are violated, or just run like hell to the nearest exit as soon as these support levels are broken. Market is so savvy and crafty, it knows exactly what they are planning. So, I won't be surprised to see some shenanigans down-moving to create much more panic and take out everybody's stops and punish all shorts before reversing right back up. That's a possibility, but is it also possible that these supports could actually hold and become a legit bounce? Yes, that's a possibility as well - I am just preparing myself to face the possibility of the shenanigan move actually occurring.
