Current price action in S&P gives us bullish signals for the nar future. Prices are supported above 1600. All upward moves have an structure, whereas pull backs are most probably corrective waves as the overlapping form they take suggest. The entire downward move from 1687 has no clear sign of an wave down, therefore we label it as a downward correction. Since at the 1600 level prices have formed a double bottom, we believe the correction is most probably over and a new upward move towards 1680 to new highs has already started. Bulls don’t want prices to break below 1608 and will try to confirm this bullish scenario by breaking above 1650. Confirmation of our bullish view will come with the break out of the yellow resistance line shown below. Bears don’t seem capable to break again below 1600-1610 area, but if this happens, then we should expect a new low towards 1580. This will not cancel our new highs view but only delay it.
SPY as shown below, holds the upward sloping trend channel and wave (IV) is near the channel boundaries. This confirms our view for S&P that the downward correction is most probably over and that prices are expected to make a new try to new all time highs.
The IWM chart below also confirms our view that the downward move from recent highs is corrective. It is clearly visible that the decline consists of overlapping waves and there is no sign of an move down. Breaking above the downward blue trend line will confirm that the correction has ended.
Concluding, the structure of the decline shows us no sign that there will be a continuation of selling pressures. On the contrary, prices are supported and ready to start a sequence of higher highs and higher lows. We are bullish as long as S&P trades above 1608.
As always, thank you for taking the time to catch up on my thinking.