Many posts yesterday that I found around the internet were talking about an impulsive wave down in S&P. Many are looking for a top at these levels and the end of the upward move from 1343. Although I agree that we are currently in the final stages of this upward move from 1343, the 5th wave could extend even to 1589-1600 level.
Although the pattern of the upward move in S&P is overlapping, the sequence of and higher lows increases the possibility that the wave structure is of small pairs of 1-2 waves. This means that we should soon expect wave 3 up. It is a very useful pattern as we can raise the stops as market rises and we will be quite certain if trend changes.
As I mentioned earlier, many saw yesterday’s decline as an downward move. This is not the case as there is an important rule that is being broken. According to wave 1 and 4 should not overlap. This is the case with yesterday’s decline. Moreover the length of time it took for wave 4 to unfold is too big in proportion to wave 2. For me these two waves are of different degree according to that characteristic and therefore there is no 5 wave pattern here.
For more help trading this index don’t hesitate to contact us. As always, thank you for taking the time to catch up on my thinking and don’t forget that we offer a one week free trial of our services…so try us and see the added value we bring to your trading.