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In our earlier , we anticipated utilizing the Elliott Wave Precept (EWP) for the :
“… W-4 of W-iii to … round $4830+/-10, which is the 23.60-38.2% retracement zone of W-3. It may probably go as little as $4805+/-5, however in uptrends, the draw back typically disappoints, and looking out increased is most well-liked. As soon as W-4 is accomplished, we should always see W-5 of W-iii to the best (gray) goal zone of $4875-4900. From there, the gray W-iv and -v to ideally $4830-60 and $4915-4945 ought to materialize.
Please notice that the best gray W-v goal zone … falls inside the [higher degree] goal zone of $4883-5026 for purple W-v. Thus, we’ve got a comparatively good settlement at three completely different wave levels on the place to anticipate the S&P500 to prime.
Quick-forward: The index topped at $4903 on January 24 for W-3 of W-iii; bottomed that very same day at $4865 for W-4 of W-iii, rallied to $4931 on January thirtieth for W-5 of W-iii, bottomed out at $4845 final Wednesday for W-iv, and has now rallied to $4995 for an prolonged W-v.
Thus, our evaluation from three weeks in the past unfolded nicely per the Fibonacci-based impulse sample proven in Determine 1 beneath.
Determine 1. Every day SPX chart with detailed EWP rely and technical indicators
With the prolonged (gray) W-v now underway, $5026 is the subsequent logical goal as it’s the (purple) 200% extension of purple W-i, measured from the purple W-ii low. It’s a quite common Fifth-wave goal stage. See Determine 2 beneath.
In addition to, since we’ve got re-labeled the rally from the October 2022 low to a Fifth wave (black W-5) as a substitute of a B-wave, we see that the (black) 200% extension of the black W-1, measured from the black W-2 to the low resides at $5046.
Determine 2. Weekly SPX chart with detailed EWP rely and technical indicators
The now 15-week lengthy rally from the October 2022 low has primarily been straight up: there’s solely been one down week since. In EWP phrases, it’s referred to as a non-subdividing wave, typical for a Fifth wave. For instance, examine it with the purple W-iii, which consists of 5 exact smaller (inexperienced) waves.
Furthermore, the decrease panel in Determine 2 reveals the 14-week Cash Circulate Indicator (MFI14), which final week registered its 2nd highest studying (94.05) since information turned obtainable 42 years in the past. Even readings above 92 are extraordinarily uncommon. They occurred solely in 1995, 1997, 1998, 2011, 2012, 2014, and 2018.
Right here, we need to look solely on the MFI14>92 events after the 2009 Bear market to check apples to apples. In 2011, the index gained ~2% over the subsequent a number of weeks and misplaced 21% eight months later. In 2012, the index misplaced 11% three months later. In 2014, the index misplaced 5% a couple of weeks later. Regained all losses however then misplaced 10% six months after the acute MFI14 studying.
In December 2018, the index gained ~8% over the subsequent few weeks, misplaced 10% within the following two weeks, rallied 10% above the value stage at which the MFI14 was >92, solely to lose 20% into the tip of 2019. The web achieve in a single yr: -12%.
Determine 3. Every day Cumulative NYSE A/D line and the Bullish P.c Index for the S&P500
Lastly, a take a look at a number of market breadth indicators may assist us assess if the present rally has legs or not. Right here we take a look at the cumulative A/D line for the broader NYSE index (NYAD) and the Bullish P.c Index for the S&P500 (BPI-SPX). The previous tells us what number of particular person shares that make up the index are on a bullish sign, whereas the latter tells us if the indexes are rising on extra advancing points or not.
Since late January, the NYAD has been making decrease highs and decrease lows. This implies the inventory markets are advancing whereas extra particular person shares are beginning to decline. In addition to, the BPI-SPX already topped in December final yr gave a promote sign in mid-January and has continued to make decrease lows and decrease highs since.
Nonetheless, the indexes have marched increased. This implies the inventory markets are advancing whereas fewer particular person shares’ charts are Bullish.
Thus, whereas we’re conscious that
value is all the time the ultimate arbiter, and
(detrimental) divergence is just divergence till it’s not,
primarily based on the EWP, Fibonacci-extension ranges, extraordinarily overbought circumstances, and at the moment deteriorating underlying market breadth, the more than likely conclusion is {that a} vital market prime is brewing.
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