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Market Reaches Final Stages of the S&P 500 Advance

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Observations on the wave pattern and what to expect next.

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My firm has been projecting a potential rally pivot at 1552-1576 for many weeks now. Though harrowing, the recent drop to 1485 was a normal Fibonacci retracement of the last major rally leg to 1531 pivot highs. We believe that this five-wave advance from the 1343 pivot lows is nearing an end based on mathematics and relationships to prior waves 1-3.

At 1569, the S&P 500 (INDEXSP:.INX) would mark a perfect Fibonacci relationships to waves 1-3 for this final fifth wave to the upside. In the big picture, we are still working higher off the 1010 pivot lows on the S&P 500, and this rally takes five full waves to complete. We think we are near wave 3 highs, and a wave 4 correction would be up next, followed by another thrust to highs if all goes well this year.

That all said, a multi-week correction and consolidation wave 4 pattern is likely once we pivot at 1552-1576. We should expect this correction to retrace anywhere from 80-100 points on the S&P 500, but one week at a time.



Twitter: @activetrading

Editor's Note: David Banister is the chief investment strategist and co-founder of ActiveTradingPartners.com, a small-cap portfolio and market advisory service.

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No positions in stocks mentioned.

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