Yesterday’s price action in the cash S&P500 is classified as an “outside day”. The major development yesterday was that the crucial 1396.02 level was broken. No matter how bad I personally believe the economy is or will be, the breaking of this number convinces me that a significant low has been made in the equities market. Specifically that low was 1256.98 and was set on March 17 (Vernal Equinox). What does significant mean? It is a low that will not be broken until at least the autumn and more likely not until 2009.Accepting this result I have modified the Elliott Wave count presented yesterday. The entire decline from October 2007 to March 17, 2008 is seen as an a-b-c-x-a-b-c “Double Three” correction. It will be followed by another Elliott wave corrective pattern that fails to make it above the October 2007 high.
From the March 17 low I believe that we are now in the “c” wave of an a-b-c zigzag pattern. We will know the zigzag is complete if we break below 1369.84.
Bottom Line: I can foresee a choppy, but overall upwards move in the S&P500 that lasts at least into the Autumn and perhaps into 2009.
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