Just when you think you have the market solved......sllllllaaap! Right across your face. Almost all technical analysis methods I use pointed to lower levels today except one, Elliott Wave Principle.
If you look at recent pullbacks in the past few months you'll notice that many large corrections were kicked off by a long reversal candlestick wick like the one from last Tuesday (I'm not showing all of them). Today we have a huge and strong bullish candle that closed on its highs above yesterday's open. Very strong internals also accompanied this candle as well, suggesting it's part of a 3rd or C wave. This is very bullish and suggests we have further strength in the market to come. Today was a solid victory for the bulls. At least for the short term.
S&P Intraday Wave Count
The decline from last Friday has been very choppy and sloppy, and despite that other technical evidence may suggest it was not a correction, EWP would have one conclude that it was in fact a correction. Well it appears EWP won here because the move from last Friday seems to quite clearly be a correction. So wave (ii) continues higher. I have wave (ii) counted as a WXY combination correction. Today's surge was the start of wave "iii." of "C" of "Y". 1105-1120, probably closer to 1120, should be good resistance for this rally. Since it's a wave "C" unfolding here, we should see a clean 5 wave rise to that area. If the 5 wave rise appears complete near the 1120 area, then I'd be looking for any weakness to add to my short positions. Ultimately, the rally should be capped below 1174 in the cash index, so my stop losses are placed just above there. Any break above that level would create what looks like a clear 3 wave drop from the highs on the year, and put those highs at severe risk of being taken out.
So today's actions strongly suggests the market has further upside for wave "(ii)". Once 5 waves unfold completing wave "C" in the 1105-1120 area, then wave "Y" should be complete as well, and therefore a large reversal may be at hand. I'll be adding to my short positions as the market rallies as long as it stays below 1174.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.
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