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Rally Enters Corrective Phase, Signals New Price Targets for the Top


A discussion of market projections, an illustration of how those projections were reached, and the aesthetic that can presently be seen in the charts.

Sometimes as you're charting, you just have to stop and shake your head in wonder.

If you've been following my articles for a while, you may have heard me refer to the aesthetic nature of the markets, and of Elliott Wave in particular. I'm going to use this article as the perfect opportunity to not only discuss my projections, but also to illustrate how I reached those projections, and with that, the aesthetic I presently see in the charts.

As a result of Thursday's price movement, the market has now given me two new data points to use toward refining my projections for this rally. Amazingly, this small amount of new data steers the projections almost perfectly into the confluence of two very meaningful market events:

1. The successful back-test of the old falling trend-channel (at roughly 1160, then again at roughly 1140).

2. The successful back-test of the neckline on the head and shoulders top (around 1275).

Below is the 60-minute SPX chart with the new projections drawn in. To me, there is a sense of harmony in these projections. If we are (as I believe) currently forming "the rally that fools the masses," then this chart surely illustrates a perfect way for that rally to unfold in such a fashion that the price action alters the landscape of investor psychology. Below the chart, you'll find my play-by-play describing each projection, along with my commentary of the psychological function each phase might serve. Most of the math I've left for the end (the math is dry, and might be better left for Ben Stein. Right, Bueller? Bueller?)

Click to enlarge
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No positions in stocks mentioned.
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