The primary purpose of this post is to show an example of upside divergence in the Fisher Transform, perhaps in time for it to make a useful contribution. We have shown this same exact chart before, but with the 'potential' divergence. That is, when we showed it (see the third chart down at this LINK), the divergence itself could not even be confirmed because there was not yet a lower histogram bar. That has changed. Now there is a divergence - with fully two lower histogram bars.
|S&P500 Cash Index - Daily - Confirmed Divergence|
Over the last two days the divergence itself has now been confirmed. But like any oscillator or divergence indicator, having confirmed a divergence is one thing. Just like the lines of the MACD crossing over to signal a divergence, the actual price action must follow through. That would most likely mean that a price bar with lower low bar than today would likely be needed to better establish that the indicator is most probably on its way to the zero line, and / or below.
Today is a reasonably good example of why one doesn't necessarily want to be the first pioneer out on the prairie. The day provided plenty of 'snap back' in price movement, and there is no reason to have acted rashly on the first lower candle.
Yes, if you haven't followed all of the comments, in the S&P500 cash, we could count a truncation high where the Dow made a higher high two days ago. And, because of that truncation, it seems like the market is telling us, 'the upward wave ended'. Then, we could count five impulsive waves down to yesterday, and a potential Flat wave up today - which may only be partially completed. The 'b:3' wave of that flat was more than 100% the length of the 'a:3' wave, making the flat a very good candidate for a true 'expanded flat'. In the S&P500, the b:3 wave was less than 138% x a:3, while in the Dow, the b:3 wave was 162% x a:3. That's a pretty impressive set of measurements, but hopefully it will help answer some questions for you about how deep b:3 waves can go, and still be valid. The two indexes are very different, and their b:3 waves did some different things. Hopefully, that is not too hard to swallow.
The divergence above lends some credibility to this count but it is still not definitive. The February highs would have to hold, and / or daily prices resume the gap-open and follow-through action lower to more clearly establish a down trend.
Have an excellent start to your weekend.