Wednesday, September 28, 2011

S&P 500 ~ Update ~ 28 September 2011

At the beginning of this year I expected a huge rally up to 1600ish by the end of this year/early 2012. Until July it looked like we were on track for it but early August the SPX broke below 1260 which was a sign that the rally was most likely over:

During the last two decades the weekly MA 76 was very reliable (as you can see in the chart above). Early August the SPX fell below it and since then each rally was stopped at the MA 76. Thus, as long as the market stays underneath it I'm bearish long-term.

The long-term Elliott wave count, I've been using for almost a year, isn't valid anymore. It's always a bit tricky to post long-term counts since there are endless options to count the markets but nevertheless I'll post the two scenarios which I think are the most probable ones:

Scenario 1: We're not in a new bear market to new lows below 666 but only in a bigger correction of this bull market. Preferred target for this correction is the 930-1010 area (50-62% retracement, 2010 low). After the SPX will have completed wave [X] we should see another big rally to new all-time highs.

Scenario 2: At 1370 the SPX completed a cycle wave b in an ongoing abc correction. During the next months and years the market will decline and eventually hit a new low below 666. A potential target for wave c is at 480 where wave a equals wave c. Coincidentally 480 is the level where the SPX started to take off in 1995. Once cycle wave c is completed all the mess in the world (debt problem etc.) should be solved so that we can start a new big bull market.

So, short- and medium-term these two scenarios are very similar. We shouldn't see a break above 1260ish, if we do though then both scenarios, especially scenario 2, are unlikely. Long-term they are very different though. Which scenario is more likely depends on what the SPX does once we enter the 930-1010ish area.

The bounce from 1120ish continued yesterday. We rallied all the way up to the resistance around 1190ish:

Support and resistance levels haven't changed. Still at 1120, 1140, 1190, 1220, 1230.