Uptrend

The rally has been explosive, gaining 96 on SPX in the last 12 sessions. Is the rally underway? Certainly the market is gaining strength, but can it continue? There has been a 155 decline from 1422 to 1267, taking 43 trading days, and the rally unfolding in 11 trading days (or 12 if you double count the low day on June 4^th). If this is a move against the prevailing bull trend from 1422, then we have an almost perfect 0.618 retracement as wave B, as shown on the chart. If the idea holds that A=C, the next move should be down with a target of 1208: 1422-1267-1363-1208, tracing 155-96-155. This is also a 0.618 retracement of the primary Elliott wave from 1075-1422, unfolding since last summer: 1075-1422=347, 347*0.618=214, 1422-214=1208! So the 1208 area might be pretty important.

On the other hand, if this is a strong wave one up from the 1267 low on June 4^th, then we need five waves, but we only have three so far: 1267-1336, 1336-1307, 1307-1363, tracing 69-29-56. The market is very overbought and can cool off sideways or with a quick decline. We still don’t know if the current wave is done, as we don’t see very many divergences. If this is a fiver, we need a 4^th wave down and then a strong reversal to confirm the bull. Market breadth is strong, so if that is the path, this will be the decision point. The pullback area should be within the 1336-1344 area. However, if the bear reappears, a failure should occur busting this support zone, with 1208 holding more promise. Is the rally to far too fast, or the start of something big? The intermediate term trend will either get legs or fail in the next several sessions.