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SPX Update: The Market Turned Where Expected -- Now What?

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The pattern we were tracking in early April caught the turn almost perfectly. Here are the next targets.

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The ending diagonal we started tracking in late March completed at 1573.66, about one-third of a point shy of the target zone. On April 3 in The Pattern Nears Resolution as SPX Flirts With Its All-Time High, I wrote:

"It is worth noting that yesterday's action did fulfill the minimum expectations for this pattern, complete with an overthrow of the upper trend line -- so while one more new high would look better, it is not required."

I was leaning toward the idea that there could still be one final thrust up still in the cards, but it never came. It's rare that the market follows a projection that tightly, which is why most traders scale in and out of positions, as opposed to trying to time every move to the exact penny. Considering that many of the TV talking heads will tell you that "you can't time the market" at all, I think hitting a turn within one-third of a point with a 7-point target zone probably argues otherwise -- especially considering that we hit the two prior turns leading into that turn within a couple of points as well.

Before we get overly excited about the bearish prospects, we do have to recognize the reality that, presently anyway, only the short-term trend is pointed downward. The intermediate and long-term trends are still pointed upwards -- for the moment.


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In the last update, I outlined my expectations for the intermediate-term, so I won't repeat that here. For the moment, we'll focus on the more near-term and see how things develop. The first chart is the S&P 500 (INDEXSP:.INX) 2-minute chart, and details my preferred interpretation of the wave structure, along with my first two targets. Keep in mind that if my wave count is correct, we're now entering the small third wave within a larger third wave -- which often means a relentless down-trend for the near-term. 1549 will become key short-term resistance if this plays out. (Incidentally, I ran out of space near the bottom of the chart, so the red 3 and 4 aren't meant as literal turn levels.)


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The hourly chart notes an intermediate bullish alternate count, which still expects lower prices for the short-term. It also highlights the first target zone, and notes the second target zone in passing. If it becomes appropriate, we'll discuss those options in more detail sometime over the next few updates, after the market reveals a bit more of the near-term wave structure.


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The 10-minute chart contains additional detail:


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In conclusion, the preferred wave count of an ending diagonal was, in fact, correct and the pattern completed on April 2. I'm hesitant to get too far ahead of the market just yet, but have outlined the next near-term target zones. In the next update, we'll build from there. Trade safe.

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No positions in stocks mentioned.
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