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SPX, RUT, NYA: Market Consolidates Recent Gains


Presently, there are no indications that the rally is under pressure.

Yesterday the market spent some time consolidating its recent gains. So far, there's nothing to indicate this is anything other than a correction before the rally continues, though as discussed yesterday, we should remain cognizant that several markets are approaching (or have reached) long-term resistance. I'm trying to weigh that fact against the indications that this is a third wave rally – and that means I'm unwilling to attempt to front-run a turn, and will wait for the market to lead in that regard.

To illustrate that point, the first chart I'd like to share is the NYSE Composite (INDEXNYSEGIS:NYA) daily chart. The long-term resistance zone is about the only thing bears have going for them here. Since 2011, the NYA has done nothing but muscle through resistance level after resistance level. As I've noted on many occasions since September 2012, there is just nothing bearish about in this chart. The mirroring shared between the last few months of the current rally and the first few months of the 2011 mini-crash is interesting.

Click to enlarge

Next, I'd like to update the Russell 2000 (INDEXRUSSELL:RUT) chart, which I last published on December 19, 2012. I noted then that I felt the pattern was intermediate bullish no matter how you sliced it, and RUT has now reached the lower edge of my previously-published target zone. It does still appear to have farther to run, and I've outlined one potential path in blue. I continue to believe RUT will act as a pretty decent litmus test for the rest of the market, and if it can claim the 902 level that's mentioned on the chart, it's going to be a bit more challenging to find much in the way of long-term bearish options for this pattern.

Click to enlarge

Finally, the update for the S&P 500 (INDEXSP:.INX), which presently looks like yesterday completed a small ABC to wrap-up red wave 4. Back below 1451 would open up the potential of a deeper correction, with the first target being 1440-1445.

Again, there's presently nothing to be bearish about in this chart, and this simply isn't the type of wave where I'm eager to try and front-run a turn -- third waves can run on much longer than one thinks is reasonable. If the market gives some signs of turning lower, and starts looking impulsive to the downside, then I'll discuss more bearish potentials.

Click to enlarge

In conclusion, some markets have reached resistance levels, but there's nothing yet in the structure to indicate that a larger correction is forthcoming. While one should always remain guarded near major support and resistance, presently, this simply appears to be a consolidation of the rally. Trade safe.

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