S&P bullish case

 The last few weeks our focus has been the bearish scenarios for the S&P. Our favorable bearish scenario, as posted yesterday, was in favor of a more complex upward correction with the form of an A-B-C-X-A-B-C. After Friday's rally the chances that 1363 cash will be broken upwards have increased substantially. Thus cancelling the scenario that wave 2 was over, but increasing the chances that if we are in wave 2, then this will probably end near 1380 but certainly above 1363. 

What about the chances of a new bullish upward move that will break 1422 and might reach the 1500 level? Is it possible? Is there a bullish wave count that supports the 1500 target? There are some signs of  impulsive moves upwards but there are also some drawbacks in them too. Taking a close look at the daily S&P chart below, you can notice my bullish wave count since June lows. The waves are overlapping but there is a continuation of higher lows and higher highs (specially if 1363 is broken) that supports the idea that we are in an upward trend. For this trend to be clasified as impulsive we need to see 5 waves up completed. This has not happened yet. The fact that we see an overlapping move makes count these waves as 1-2s for the sake of a bullish view.

For this bullish count to be invalidated, the index must break its last low. That low is the area of 1310 cash. If that level is broken downwards, the decline could be very steep and markets will probably test 1260 levels. For this bullish count to be confirmed, the market must continue upwards unfolding a series of  3rd and 4th waves to complete extensions and the move from June.

 Technically speaking another fact that may support S&P and avoid a market crash is the pitchfork that has been placed in the weekly chart. S&P has tested the lower pitchfork support and has bounced upwards since then. Holding this support could give the index enough power to test the middle pitchfork resistance.

Another bullish indicator in a weekly chart is the crossing of my EMA. Although this might be a lagging indicator, combined with the fact that the index is above another pitchfork support is bullish enough for me.

Concluding I would like to note that bulls still have chances of survival despite the european debt fears and the possibility of a collapsing europe. As long as the wave count continues to be valid, and as long as support levels hold, bulls might have a good rally to expect over the next months.