With S&P breaking above previous all time highs at 1850 yesterday, bulls where feeling like the road to 1900 was wide open but the close of the day gave a different message. Yes we are in a bullish up trend. Yes the market can go to 1900 or even 2000 until May or June. But from these levels we believe that bulls should raise their stops and prepare for a pull back. Today most analysts using wave theory like me post their view of an ending diagonal for wave 5 of the rise that started at 1737. I agree that we are in the final stages of the rise from 1737 and a downward correction towards 1800 should be expected. The market should make a new higher high towards 1860-70 and then pull back. If on the other hand 1836 is taken out before a new higher high is made, then we should expect 1805-10 to be the first support area to bring buyers back in.
S&P will make a top soon and most probably this week. I expect a pull back towards 1800. The strength and form of the decline I anticipate will clear things up whether this pull back should be bought or not. The impulsive rise from 1737 suggests that as long as we stay above 1737 we should buy pull backs with 1950-2000 target.
Breaking below 1737 will be bad for the longer term trend and will confirm that we are starting a large degree correction. Initial signs that 1737 is in danger, will be if the index breaks below 1770-60. More can be said at the end of this week once we get more data on what the market prepares to do.