Bulls Win - Rally Continues

I wouldn’t have bet on it but the bulls have triumphed. Yesterday’s uptrending day broke the May 2 high of 1422.72. To me this implies that the correct Elliott Wave count is an a-b-c-x from the March 17 low.

The next a-b-c pattern is underway from the May 9 low. First look targets are 1450 or 1510.

A Natural Reversal Point?

The mighty battle over the May 2 high (1422.72) continues. We got close yesterday (1420.19) before we suddenly fell off. Have the bulls failed? Will the bears now break this market below 1384.11 which would point to a downward slide to at least the 1340 level? I don’t know; but here are some interesting facts about the price action (see today’s chart).

1) 1384 is 90 degrees from 1422 on a Gann wheel.
2) The dates of May 2, May 9 and May 14 make a symmetrical Fibonacci Triangle.
3) The point of sharp reversal yesterday (1420.19) is at a Fibonacci cluster associated with the swings from the May 2 and May 8 highs to the May 9 low.

Waiting for the Trendline Break

On Tuesday, even though we closed lower, we had another uptrending day for the cash S&P500. At this juncture I continue to believe the odds favor a move below 1384.11 without/before breaking the May 2 high. Such a move would break the “0-b” trendline (in orange on the chart) and point to a downward slide to at least the 1340 level.

If the bulls want to keep the rally from March going they must move the market above the May 2 high before the 1384.11 level can be broken. If this can be done we would have to conclude that the shallow decline from May 2 to May 9 was an “x” wave.

Can the Bulls Keep it Going?

On Monday we had an uptrending day for the cash S&P500. If the bulls want to keep the rally from March going they must move the market above the May 2 high before 1384.11 can be broken. If this can be done we would have to conclude that the shallow decline from May 2 to May 9 was an “x” wave. However, I believe the odds favor the bears here. A move below 1384.11 before breaking the May 2 high opens the door to the “b” wave scenario described yesterday.

The Weekly Chart

Regular readers know that I have been counting the rally from the March 17 low as an “a-b-c” zigzag pattern. Today’s weekly chart shows how that (completed?) zigzag fits into the larger picture. Notice the Fibonacci resistance at the recent high as well as the medium term (blue) moving average.

However, I must keep in mind that the weekly chart is still on a technical “buy” signal. This implies that any move down will not make new lows. Therefore, if the zigzag from March is an “a” wave of a bigger pattern we will now see the “b” wave; which would deeply retrace (but not completely) the rally we just had. There is another possibility though: the zigzag will be followed by a shallower “x” wave retracement.

If we are now embarking on a “b” wave decline then for a roadmap I am thinking that the low comes in mid-August. That outlook means a continued choppy range bound market over the next few months.