The weekly chart of the cash S&P500 index formed an uptrending price bar this week. The upward price pulse from the recent 1406.10 low continues. Last weekend I asked “Is wave “c” over at 1406?” My answer to that rhetorical question was “I think the weekly technicals are saying “yes”, but first we will have to see if resistance can be broken at the 1490 level.” Well we broke above that area on the daily chart and we are now battling resistance at around 1500 (red and blue moving averages on today’s chart) on the weekly chart. Even though we have popped above those moving averages I can’t say we have cleared through them. Anyways, back to our Elliott discussion.
As you know I have been of the opinion that we are forming a corrective pattern from the July high. Furthermore; I continue to believe that the pattern best fitting the weekly chart is a Contracting Triangle from the July high, with the move down from 1576 to 1406 as wave “c” of that correction. That would mean that we are now in wave “d” with an “e” wave decline to come. Important though is the fact that in such a pattern the “e” wave will end above the “c” wave low. This means that the correction low is in.
Tracking the “d” wave in real time will be a challenge for me. I do know that it will end below the “b” wave peak. But where? And when? A possible guideline to use is from Connie Brown’s book “Technical Analysis for the Trading Professional”. On page 222 she writes “Wave D …. Frequently forms a Fibonacci relationship relative to wave B.” We are at the 50% level now, where we are battling resistance with the moving averages as explained above.
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