S&P false breakout or slow start?

Αδυναμία ανοδικής διάσπασης στο ΧΑ.
July 1, 2013
USDJPY in downward correction
July 3, 2013

S&P broke above the recent high at 1620 yesterday showing signs of strength. The close however was a different picture with prices falling towards 1615. So is this break out valid and how can Elliott wave Theory help us determine what to expect next? The corrective move from 1620 to 1600 was a shallow correction that nearly reached the 38% Fibonacci retracement. Could this be wave 2 or B? If you are bullish like we are, the correction at 1600 finished wave 2. This is our most probable scenario. The upward move from 1600 although overlapping, we believe it will unfold in wave 3 up that will ultimately break above 1650.

spx10M

As shown in the chart above, the wave count we prefer is the one shown in the chart. The overlapping waves we believe will unfold in a bigger move upwards. When will this wave count be canceled? If prices fall below the blue support level shown in the chart by the solid area. If this happens, bulls have an alternative.

spx60M

If support at 1606-1600 fails, we could expect the correction to move towards 1580. That level we believe will be decisive for the intermediate term. Bears on the other hand see yesterdays upward move as another part of the correction that started at 1560 an believe that soon prices are going to reverse impulsively downwards. If you feel bearish, the stop for your position should be the 1654 high. So you now know your stop. If you feel bullish like we do, 1560 is the ultimate stop. But 1606 can also be used relative to our Elliott wave count that we mentioned earlier.

As always, thank you for taking the time to read my new  post.

impulse-wave-rules

Alexandros Yfantis
Alexandros Yfantis
Fascinated by financial markets, studied International Securities Investment and Banking in the UK, works as a Portfolio Manager in Greece and runs a technical analysis website. Enjoys travelling and spending time with his family and preparing for the black belt in Korean Karate.