x
Breaking News
0

S&P 500: A Deep Dive

By Dragonfly Capital (Gregory W. Harmon)Stock MarketsJan 12, 2018 02:31PM ET
www.investing.com/analysis/sp-500-a-deep-dive-200279999
S&P 500: A Deep Dive
By Dragonfly Capital (Gregory W. Harmon)   |  Jan 12, 2018 02:31PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The bull market is in charge and holding court. Many believe that the latest charge has been going on since the cathartic sell off during the Financial Crisis that bottomed in 2009. Others will note that pullbacks in 2010 and 2011 entered bear territory and therefore the run started. And still others will point to the deep pullback into early 2016 with its long drawn out stagnant action as the start of the latest bull market leg. Which camp you fall into likely depends upon your time-frame. And frankly, it does not matter. The market is going up and fast.

S&P 500
S&P 500

The S&P 500's long-term view gives some insight into this and a few possible thoughts on where the S&P 500 may be heading. The chart above shows the S&P 500 rising out of a long base in the 1970s to a top at 1500 at the height of the dot-com bubble. That's a long time ago but the impact might be important. The run up ended an Impulse Wave higher and preceded a protracted broad consolidation period. The chart below continues the picture, showing the consolidation and corrective action from 2000 to 2013.

S&P 500: Consolidation And Correction
S&P 500: Consolidation And Correction

The break out to the upside in 2013 was a major signal of bullishness after 13 years of stagnation. The move from the bottom in 2009 began a new Impulse Wave. The classical break of a wedge gave a target to 2554, and that has been left in the dust. Elliott Wave principles give a range of 2500 to 2800 as the end of Wave (III). This comes from extending Wave (1) and (3) to the bottom of Wave (4). But this range does not have to limit it. There really is no way to predict the final top, if there ever is one.

With the S&P deep within this range and above other measures, it warrants watching closely. Momentum is also running very hot. The RSI over 86 is higher than it has been in over 20 years. The same goes for the MACD. Momentum can always continue to get hotter, but this is also a sign that more time has run out of the bull than there may be left. This is where the doom and gloomers come in. The end of Wave (III) does not have to mean a deep pullback or correction or crash. Markets can correct through time as well as through a price drop.

Elliott Wave gives us a possible road map for the future. Often the two corrective moves in the Impulse Wave are opposite in nature. And with Wave (II) being a pullback of about 18%, Wave (IV) should be flatter, more of a sideways correction like the Wave (4) correction within Wave (III). The first one, Wave (II), lasted only 6 months. All this leave Wave (V) to continue to the upside. With a flat Wave (IV) a target range for Wave (V) would be 3200 to 3700.

Predicting the top of a run is a fools game, and many have joined the fools club over the past 8 years. I do not intend to be one of them. Follow the easier path to the upside until it ends. And continue to reassess along the way. If you are worried about pullbacks then add downside protection. That's what options are for.

S&P 500: A Deep Dive
 
S&P 500: A Deep Dive

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

 
Are you sure you want to delete this chart?
 
Write your thoughts here
 
Replace the attached chart with a new chart ?
Post
Post also to:
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments
Ilya Atomiq
Ilya Atomiq Jan 13, 2018 10:39AM GMT
Saved. See Saved Items.
This comment has already been saved in your Saved Items
What do you mean by adding downside protection?
Reply
0 1
tony ooh
tony ooh Jan 12, 2018 11:02PM GMT
Saved. See Saved Items.
This comment has already been saved in your Saved Items
strange, but this column today reflects much of what ms mislinski has stated in earlier columns presented here. just sayin'.
Reply
0 0
 
Are you sure you want to delete this chart?
 
 
Replace the attached chart with a new chart ?
Post 1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email