When the U.S. stock market made it clear March 1 that investors should expect a pullback or consolidation, which we correctly called for, we knew it would set up a rally toward 2,500 in the SP 500 Index
into the summer, as we have been reiterating since then.
With the market now exceeding the resistance region between 2,410 and 2,425 that we had been citing for months, it has opened the door to our next target in the 2,500-2,565 region, with the ideal target being around 2,530. Moreover, as you can see from the daily SP 500 chart attached, the moving average convergence/divergence (MACD) has now poked its head above its prior peak, which supports this breakout toward 2,500.
So, currently, the market is in a very bullish posture, and I will maintain such expectations as long as we remain over 2,420. It would take a strong break of 2,420 to suggest that this was only a fake-out, and that the market may drop down again to the 2,330 region before we head to 2,500. But, for now, the pattern looks quite bullish, and that is how one should treat it as long as we do not break 2,420.
Should this immediate bullish pattern continue to push us higher into our target zone in the summer, then we will likely have to prepare at that time for the next pullback/consolidation in the market, which will likely be larger than the one we recently completed. Furthermore, the next pullback could take us from the 2,500 region back down toward around 2,300. So it may be prudent for investors to use this rally to lighten their load as we head to 2,500, and then prepare for the next buying opportunity, which will likely occur in the fall (maybe even around Thanksgiving) should we top in the middle of this summer.
But, as we have been reiterating for years, it is not likely that this bull market is near completion just yet. And even though I expect another pullback into the fall back down to the 2,300 region, that will likely set us up for a rally to attack the 2,600 region into 2018. Once we complete that segment of the bull market rally next year, then we will likely be set up for a 15%-20% correction into 2019, just as the masses become interested in the stock market, with most analysts likely turning uber-bullish. But isn’t that the way it normally works?
See charts illustrating the wave counts on the SP 500.
The writer has no holdings in any securities mentioned.
Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net, a live trading room featuring intraday market analysis on U.S. indices, stocks, precious metals, energy, forex and more, along with an interactive member-analyst forum and detailed library of Elliott Wave education.