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With Bullish Wedge On S&P 500 Completed, 4600+ Target On Track

By Dr. Arnout ter Schure Stock MarketsMar 17, 2022 03:14PM ET
www.investing.com/analysis/with-bullish-wedge-on-sp-500-completed-4600-target-on-track-200620299
With Bullish Wedge On S&P 500 Completed, 4600+ Target On Track
By Dr. Arnout ter Schure   |  Mar 17, 2022 03:14PM ET
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Last week, while most traders, investors and market pundits were doing Chicken Littles and selling doom and gloom stories, I used objective analyses of charts and data to conclude a rally– -and not a crash – was the most likely scenario. See here. Namely, I found the S&P 500:

  • was forming a (bullish) falling wedge;
  • exhibited positive divergence between price and several technical indicators;
  • sentiment was highly bearish; albeit the index had only done a garden-variety 13% correction;
  • seasonality was pointing towards an essential low around mid-March.

Providing all these facts told me the weight of the evidence was pointing toward higher prices, not lower, and that a rally to SPX 4600+ would be in order.

One week later, the index is already trading at SPX 4400, as it broke out of the wedge yesterday. Once again: objective analyses 1, emotions and opinions 0.

Figure 1. S&P 500 daily line charts with technical patterns and indicators:

S&P 500 Daily Chart.
S&P 500 Daily Chart.

SPX 4600 Next, Pullback, Then A Rally?

The 50- and 200-day Simple Moving Averages (SMAs) at SPX 4437 and SPX 4470, respectively, should provide some resistance, but based on my Elliott Wave Principle (EWP) work, I expect the stock markets to have put in a lasting bottom, and that a subdividing five-wave rally to SPX 5500-6000 is now under way. Namely, the Feb. 24 low was for the SPX a fourth wave low, and now wave-5 is under way. Based on current data available, I anticipate the first wave of wave-5 to top out at around SPX 4600. The second wave should be a multi-day few hundred points correction before wave-iii of 5 targets, ideally, SPX 5100+/-100.

Bottom Line: Last week, when the S&P 500 was trading at around 4200, I found the index was exhibiting a bullish pattern, called a falling wedge or an ending diagonal C-wave in EWP terms. This pattern projected a move to SPX 4600+. Four trading days later, the SPX is trading at 4400, an almost 5% gain, whereas nearly everybody had jumped on the bearish bandwagon. I, therefore, still expect the index to top out at 4600+/-100, a pullback to around 4400+/-100, and then a rally to SPX5100+/-100. The devil remains in the exact details, but I am not too concerned about those. I prefer to focus on the forest and not the trees. Ultimately, the melt-up to SPX 5500-6000 should be under way as anticipated.

In November, I was looking for a 10-15% correction. See here.

With Bullish Wedge On S&P 500 Completed, 4600+ Target On Track
 

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With Bullish Wedge On S&P 500 Completed, 4600+ Target On Track

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Comments (25)
Mr Doodl
Mr Doodl Mar 19, 2022 3:30PM ET
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Great analysis!
Occams razor oc
Occams razor oc Mar 18, 2022 3:56AM ET
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Great to read your take excellent job hope you doin great man .....fotis2
Vesa Saarinen
Vesa Saarinen Mar 18, 2022 1:32AM ET
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3000 soon
Adam Paine
Adam Paine Mar 17, 2022 11:32PM ET
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so no pullback from inflation squeeze, no QE, higher interest rates, supply chain issues, neon output, covid in china and a possible world War? cool, 10k here we come! just watch out for the cliff ahead...
dee money
dee money Mar 17, 2022 11:32PM ET
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interest and inflation already priced in. China already opened back up after 4 days of lockdowns. war already priced in until ACTUAL & FACTUAL ww takes place. you are a big sour puss huh? that bearish position you are holding has you believing in everything
dee money
dee money Mar 17, 2022 11:32PM ET
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oh, and 1 more interesting fact you left out. UNEMPLOYMENT dropped yesterday too. But I guess that is bearish too huh?
Ron Raymond
Ron Raymond Mar 17, 2022 11:32PM ET
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Wall Street gamma squeeze needed to wipe ot shorts to take more money is all this is, too many shorts were hurting their downward profits. Surprise is their way to most profits.Algo driven squeeze is all this is, Elliot wave and printed lies put out will not save the market from dropping. More like heading towards 3000 as said in above comment.
anna wong
anna wong Mar 17, 2022 10:22PM ET
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Great. how about the Nasdaq?
Thomas Machado Monteiro
Thomas Machado Monteiro Mar 17, 2022 10:22PM ET
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Matt Comins
Matt Comins Mar 17, 2022 10:10PM ET
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A rally to 6000? Sounds like you’re using all that money you’re making to ******crack smoke up people’s butts
Jeff Page
Jeff Page Mar 17, 2022 9:53PM ET
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Does EWP adjust your RSI? I've seen 1 CMT change to 40, 60, 80.
Steven Kilgore
Steven Kilgore Mar 17, 2022 9:50PM ET
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I really enjoy reading your articles as they are fact based, ie off charts and not just willy nilly guesses. That being said I just am not sure we keep going up. To me it would take Russia ending it war + the Fed pulling off the merical of a lifetime in bringing inflation down without crashing the whole economy and putting us into a recession. And that’s not even taking into account the current political climate. While I am mostly in all cash so I dont have a horse in this race at the moment I just do not see a catalyst to push this higher without a serious downturn first.
Bruce Wayne
Bruce Wayne Mar 17, 2022 9:49PM ET
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Thank you for your analysis and documented previous work Dr. S. Curious if you also analyze Gold? Would love to get your thoughts and analysis on it. I went thru your previous articles and did not see anyhting.
peter neal
peter neal Mar 17, 2022 8:47PM ET
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We have hyper inflation which will put us in a recession. Fed will have to reverse and ease and buy bonds again. Market losses faith everything collapses into a depression. Gold goes to 10000. This will happen this year. Good chance it could be worse. Thanks.
peter neal
peter neal Mar 17, 2022 8:47PM ET
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Same as 2008 but no fiscal monetary polices available to stimulate economy and inflation is pegged at 10 percent with food and energy shortages. High Labor costs are now fixed into the system.
Ken Warren
Ken Warren Mar 17, 2022 8:47PM ET
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peter neal  No resemblance to 2008.  That was a financial collapse.  Current economy is very strong.
 
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