Following is a chart of the S&P 500, the mid-term lows are highlighted in Yellow. Notice that until now, each low was higher than the previous low. Also note that each was marked by a similar decline in the MACD, the lower indicator. The other major divergence is that this is the first time that we did not go positive on the MACD prior declining.

What does this mean? It shows that there is a change in the overall market direction, though we don’t know if we are in a bear market or a consolidating market because we haven’t made a lower mid-term high, as indicated by a positive MACD. Though you can only see back to 2006 this has held true since mid 2004.

Over the past week we have made a strong bounce off the bottom. The MACD is turning up giving us a buy signal, though the Stochastic is now up showing that we could soon be overbought on the short term.