The S&P will let it's intentions known soon

The S&P will let its intentions be known soon

 

About Avi Gilburt

Avi Gilburt is author of ElliottWaveTrader.net, a live trading room and member forum focusing on Elliott Wave market analysis. Avi emphasizes a comprehensive reading of charts and wave counts that is free of personal bias or predisposition. A lawyer and accountant by training, he is also managing member of Gilburt Financial Services, LLC, which provides financial markets analysis and consulting. His Elliott Wave analysis appears frequently on sites such as SeekingAlpha, where he is a certified contributor, and TheTechTrader.com with Harry Boxer.
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By Avi Gilburt

Last week I warned of the potential for the market to take us up toward the 1600 region in a diagonal pattern. But if the market is going to continue its rally toward 1600 in a diagonal, with an impending large pullback, it is sure hiding its intentions to do so quite well.

It won't be able to do so for much longer, though. It seems that the coming week will either validate this possibility or finally put it to rest.
In last weekend's update, I explained, that, "in a diagonal pattern, the market provides both bears and bulls enough fodder to think they are both right, and will string them along, while whipsawing each side, to the point neither becomes sure of the direction of the market. As the bulls become accustomed to buying big dips and bears are afraid to maintain short positions in this type of environment, once the top of the ending diagonal is finally hit, the market simply continues down in a very strong manner, surprising both bears and bulls alike."
In order for this pattern to play out as a diagonal, it will have to let its intention known very soon, as the more bullish pattern hasn't broken a single Fibonacci Pinball support level yet, although it has come very close.
Meanwhile, it has provided for some wonderful day trading opportunities, some of which exceeded 10-point trades within a day, like the one we had on Friday.
Last weekend, I suggested that we should expect to head higher during this past week. My initial target region was the 1474-1484ES region, which is exactly where we found ourselves on Friday, as the high we hit was 1481ES.
In the ideal diagonal scenario, the market will be topping out within the next 3 points at 1484ES, and starting a deep corrective decline. Any break down below the 1471ES level will provide us with the clear initial signal that the top of yellow wave 1 has been hit, and we are heading down for wave 2 of the larger diagonal pattern, with the confirmation coming in a breakdown below 1455ES and 1445ES.
However, in order for the uber-bulls to maintain control over the immediate bullish trend, not only must they not approach the 1471ES level, but they need to push this market up toward the 1491-1497ES region to complete wave 3 of (5) of wave iii of 3, as you can see from the 60 minute chart.
If the market is able to do so early next week, then the pullback/consolidation from that region should maintain support over the 1477ES region, as represented by the blue box for wave 4.
This should lead to a wave 5 rally, with an ideal target zone between the 1507-1520ES region, providing us with a top and causing a several week consolidation in wave iv of wave 3, before we head up toward the 1550ES region next.
For those that are asking why I am unable to pin down the count more clearly between these two potential scenarios, it is because the gap up in the futures has left us with incomplete information regarding the wave structure, and both these interpretations are reasonable guesstimations of the wave structure within that gap based upon the wave structure we have been dealing with of late. But it should not be too much longer until we are able to rule out one of these two larger bullish potentials.
See charts illustrating wave counts on the Emini S&P 500 and INX.