Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

S&P 500 Update: 1344 Reversal Target Hit, Time for the Expected Relief Rally


A sharp rally should now unfold, as sentiment turns briefly bullish again.

MINYANVILLE ORIGINAL There's not much to add from the past few days. Yesterday played to perfection, and I simply can't predict the market any better than that. I won't always hit things that perfectly, so please forgive me when I whiff on one!

Anyway, after yesterday's 1339-1344 target reversal zone was tagged, the market spiked immediately. Of course, the media attributed this to positive rumors and news out of Europe. Isn't it funny how "someone" knew to start these rumors just as my target reversal zone was reached? Obviously, they didn't. Technical analysis, and specifically Elliott Wave Theory, is all about sentiment. The chart pattern revealed (at least, under my interpretation) that sentiment would be bottoming yesterday, and voilà, it magically did.

If Wednesday's action doesn't clearly illustrate why I believe that the charts are the leading indicator, while the news is a trailing indicator, then I don't know what will.

Accordingly, there's no material change from Wednesday's update, and the current expectation is that this bounce will be sharp but relatively short-lived. Sentiment should experience a brief spike as well, but expect some bad news to follow near the wave ii top.

The potential now exists for a dramatic sell-off if and when the S&P 500 (SPY) breaks 1340. Think in terms of potential energy: The market has coiled itself up like a spring, and if the 1340 zone breaks, it will release a huge amount of pent-up energy very rapidly.

Of course, there are other interpretations of the charts, and the possibility always exists for this to have marked a more meaningful bottom than I'm currently anticipating. If 1340 doesn't break in the future, then that potential energy never gets released. I don't view that as likely at present, but I will certainly monitor the market's signals and update you if my view changes.

Below is the expectation for the current rally. As I talked about yesterday, I expected the market to decline into the target box and then generate a solid bounce. It appears that's now unfolding. The chart below indicates the upside targets.

Click to enlarge

Below is the bigger picture view of the SPX. No change here either.

Click to enlarge

In conclusion, if my preferred interpretation is correct, then this bounce should be a fantastic selling opportunity. I'll keep watching the short-term structure and attempt to narrow down the targets over the next couple days, and -- of course -- alert you if there are any changes to my big picture view. Trade safe.

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos