Yesterday's analysis gave 1384 in S&P as the level where prices were sure to trade. The index made a low just 1 point higher and then rallied and erased all losses. Not only did the market came to pare its losses, but it also moved even higher to close at 1409 area. We mentioned that it would be important to see the form the decline would take. At first I was expecting that this decline would only be wave A, but it seems that the 3 wave decline was the entire corrective downward wave. This means that we are now expecting an upward 3rd wave. DJIA and SPX have moved in a similar pattern finishing 5 waves up from recent lows and then made a 3 wave downward correction that completed at the 38% retracement.
That retracement level was our first target and it seems it has been achieved and the market seems to start a new upward wave. Prices in both indices not only made 3 waves down at 38% retracement, but prices also completed this correction at the same level as the previous 4th wave. 2nd waves tend to be more aggressive and finish near 61,8% retracement. However there is nothing here that cancels any of the rules of elliott wave theory. Our view is bullish for the end of the year and a double top could be expected to be seen. November lows are very important support levels that should not be broken for bullish view to remain intact.
As always, thank you for taking the time to read my new post. If you need help trading these indices don't hesitate to contact me.
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