S&P500: What is the significance of the next top?

This is a summary of this week’s weekly digest, available to premium members only.

Last week’s price action suggests either minor-b of intermediate-iv is underway or minor-1 of intermediate-v. Either way we expect one more rally to SPX2407-2417, with an ideal target of SPX2410 before this up-wave ends. But, a break below SPX2378 without making any new highs is a first sign SPX2398 was all she wrote for minor-b. A break below SPX2361 will confirm this and SPX2330-2280 is then back on the radar. Over SPX2431 and intermediate-v is underway. However, we don’t expect SPX2420/30s to be reached in this wave-up for now.

Figure 1 below shows the minor-b of intermediate-iv and minor-1 of intermediate-v counts. Both target -ideally- the same end zone: SPX2407 vs SPX2410-2417. The former count then has the S&P500 target SPX2330-2280, whereas the latter targets around SPX2360-2350 before minor-3 gets the market back to new ATHs.

Minor-b count: A drop below SPX2378 before making new highs is a first sign minor-b has completed as then there’ve only been 3 waves up off the SPX2329 low. A subsequent drop below SPX2361 will then confirm it. Five waves up to SPX2407 will not change the minor-b wave scenario as c-waves (minute-c of minor-b) are often five waves. Only a break above SPX2431 will take minor-b off the table (>1.382x extension of minor-a)

Minor-1 count: Ideally SPX2382 is the low for minute-iv, as there’s slight positive divergence on the hourly RSI5, but another 4p drop to SPX2378 can’t be excluded. Either way,  SPX2410 is more likely than SPX2417.

Figure 1A. SPX 60min chart: minute-c of minor-b reached second upside target: 1.382x extension. B: minute-iv of minor-1 should be about complete. 

spx hourly 2spx hourly 1

On the S&P500’s daily chart we observe price is at the upper black trend line: support. This needs to hold or the lower red trend line is next. Price is above the 50d and 20d SMA, which both are pointing up. The Money Flow Index is not confirming the higher prices, and large negative divergence remains on the MACD as well. The A.I. gave a non-ideal sell signal on Friday, but the MACD remains on a buy. Hence, the daily chart is a mixed bag of signals, though price is above SMAs and trend line support.

Figure 2. SPX daily chart. Price right at trend-line support. None-ideal A.I. sell signal .

spx daily

Last but not least, our Fib-timed trading interval is set for May 2nd on the S&P500 and today for the DOW (Latter not shown). This fits well with another Bradley turn date for May 5th (see here).

spx time fibs

Bottom line, and as we advised our premium members last week: “we should turn cautious the higher the market goes shorter term, especially when price is reaching the SPX2390-2410 zone as that zone has a very good potential to present a challenge to the current rally.” In addition, the market is currently giving mixed signals (TECH booming, DOW lagging, breadth lagging). And although this is -most likely- not a long term top, with the current ambiguity it may be wise to cash in some chips until things clear up.

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