Higher To Go?

Friday’s price action showed some reluctance to move lower aggressively, and this resulted in some minor positive divergence developing in the hourly as well as the daily chart.  The price pattern that we are making suggests that the decline is ready to take a breather and it would fit in with our expectation that a cycle is bottoming.”

This is what was written last week in my daily chart analysis of the SPX. At the time, if we did reverse, there was a potential move to 2850 before the counter-trend rally concluded. This has been exceeded by a good margin and, since there is no real warning that the rally is over, we need to wait until the signs that we are putting an end to it appear.  Another reason for expecting an imminent low to be made was the fact that we were approaching the ending phase of the 45-td cycle

In spite of this renewed market strength, another decline to a level lower than the recent low of 2728.81 is expected as we move closer to the time frame previously stated for the larger C-wave to come to an end. It is still several weeks/months away. As to whether or not the 2346 December low will be exceeded, we have to put that on the back burner until the structure of wave IV becomes more defined.

SPX daily chart

After a decline of 226 points, the bulls had had enough. Their decision to regroup and mount a counter-offensive was more visible on the hourly chart than on the daily (as stated above in the quote from last week’s letter). But that they had this much energy stored up was not visible at the time, and it does not look as if it has completely run out.

So how much higher are we going with this? According to the P&F chart, a tentative count to 2910-2940 is a possibility. The Fibonacci retracement of .618 has already been exceeded, and we have almost reached 2888 which would be a retracement of 70.7%. In other words, trying to put a number on the rally high would be a guessing game and we’ll have to simply wait for signs that we are ready to reverse, imperceptible as they might be -- as with the recent low. With no real deceleration in sight, and with all three oscillators still in an uptrend, odds favor higher prices, perhaps until they meet resistance in the vicinity of 2900+ which is designated on the chart as the juncture of various important parallels.

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Analysis of the short-term trend is done on a daily basis with the help of hourly charts. It is an important adjunct to the analysis of daily and weekly charts which discusses the course of ...

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