Trying to reach an objective conclusion through technical and wave analysis on what SPX could be preparing for the 4th quarter, I found that the recent lows just above 2100 will be key for and equally important as the size a distance of a new high that may soon be seen. SPX made a breakout to new highs in early July up to 2190 and has now pulled back to back test this break out. So far price has bounced again of our previous highs and this is a successful back test in favor of the bulls.
SPX continues to trade above daily and weekly cloud support making higher highs and higher lows. Only one EW bullish scenario implies that the new all time highs that are coming could take us towards 2500. Two other bullish scenarios imply marginal new highs and then a sell off.
In both these scenarios the key will be the size of this final wave up. If this final wave up is bigger than the post Brexit rally, then a new very bullish scenario comes in play with targets reaching 2450-2500.
On the other hand a lower high at current levels and rejection, increases the chances of an expanding triangle correction scenario as shown in the chart below. This is the only scenario where we do not see new all time highs in SPX.
Overall we should not ignore the bearish divergence signs in the oscillators on a daily and weekly basis. New all time highs do not necessarily new bull market as this could very well be the final stages of the rise from 2016 lows. 2100 is the key for the short-term as if this support is broken an at least equal leg decline towards 2080 will follow. However after such a break down the most probable target will be the 2030 level.
Early warnings will be given once the upward sloping red trend line support is broken, currently at 2130.
Thank you for taking the time to catch up on my thinking.