We still believe there is more upside to the U.S. equity market before a 20%-30% correction, despite the trade wars and, now, Turkey.
For now, we are trying to focus on the S&P 500’s
SPX, -0.40%
next melt-up phase and whether it will top out at the lower end of our target zone in the 3,011-point region or rise to our ideal target around 3,225.
Read: These U.S. stocks have been hit hardest amid Turkey’s turmoil
With the market pushing higher than I had wanted to see over the past week, it has added some complexity. Allow me to go through the perspectives I have laid out on the chart. But, first, I want to note that the patterns I am tracking on the 60-minute chart are all with the proviso that we maintain over 2,730 on the pullback that happened at the end of last week.
Now, with that in mind, allow me to highlight my preference, which you can see in green. Within this structure, the market “should” drop down to at least the 2,790 region this week, but more preferably to 2,750-2,770 in a (c) wave of the green b-wave. And, that b-wave is within wave (iii) of an ending diagonal, which will not likely extend beyond 3,011 later this year.
The more advanced pattern of that wave (iii) in the ending diagonal is presented in yellow, which would suggest that this pullback is one degree ahead of the green count. That means the b-wave has already been completed, and this pullback is wave ii of the c-wave in wave (iii). This is probably my least favorite potential for the reasons I noted last week.
For both of those potentials, my target for wave (iii) is 2,935-2,965. And an impulsive move through 2,854 would suggest a run to our next higher target.
Bullish pattern
Due to the higher move early last week, I have to now consider the more bullish pattern to 3,225 more seriously. I have labeled that pattern in blue, and it is an alternative pattern at this time. This pattern has a leading diagonal for wave (i) completed off the early April lows, and has us now setting up for the heart of a 3rd wave, ultimately pointing us over 3,100 on the SPX for wave (iii). However, in order to prove this is the operative count for wave (5), we will need to see a strong break out through 2,890 in the coming week or two. Should this occur, then we will likely see a pullback to the 2,870 level, and as long as we hold the 2,840 region on that pullback, it will be pointing us up toward 3,100 in quick fashion to complete wave (iii) of wave (5).
Again, I want to reiterate that we have had to deal with all this additional complication in 2018 simply because the wave (4) did not provide us with a clear 5-wave c-wave completion. This has allowed for two possibilities as to where wave (4) ended and where wave (5) began. The lower level for wave (4) allows for the more bullish structure pointing still to the 3,225 ideal target we set quite some time ago for wave (5) of v of 3, whereas the triangle structure which completed in early May would suggest that we may not exceed the lower end of our target zone for wave (5) of v of 3 in the 3,011 region.
However, I think we will finally be able to distinguish between the two major potentials within the next two weeks. Ultimately, I still think the market has some upside left to it.
See detailed charts illustrating the wave counts on the S&P 500.
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.
Source : MTV
