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With S&P 500 Rally Continuing: Was That All the Pullback We Got?

By Dr. Arnout ter Schure Stock MarketsDec 01, 2022 02:01PM ET
www.investing.com/analysis/with-sp-500-rally-continuing-was-that-all-the-pullback-we-got-200633023
With S&P 500 Rally Continuing: Was That All the Pullback We Got?
By Dr. Arnout ter Schure   |  Dec 01, 2022 02:01PM ET
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Using the Elliott Wave Principle, I found the S&P 500 two weeks ago:

The index should now be in a multi-day corrective pattern into late November, ideally targeting the black W-b box at $3,735-3,875.

Since then, the index dropped to as low as $3,906 and rallied as high as $4,034. Thus, it had been stuck in a 130p range until yesterday, when it broke higher. Thus, we indeed got a multi-day corrective pattern. But was that sideways range for two weeks all we got for the anticipated b-wave lower? And now, is the “more significant black W-c back up to ideally $4,350-4,500” under way?

Let’s assess the index’s daily chart, starting with figure 1 below.

Figure 1:

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

The two-week sideways price action fell 31p (0.8%), short of the upper end of the ideal target zone for W-b: $3,906 vs. $3,735-3,875. Thus, technically, the Nov. 17 low at $3,906 could have been enough. However, the price action over the last two weeks looks more bullish than bearish, as a potential bull flag formed (dotted green pattern), ideally targeting around $4,225. Besides, this week’s higher low ($3,937 vs. $3,906) and yesterday’s rally suggest the index is in a subdividing green W-5 (grey W-i, ii, iii, iv, v) targeting the grey target zone at $4,200+/-25 ideally. Thus, the ideal Fibonacci-based impulse pattern’s fifth wave target zone matches well with the technical bull flag pattern. That would then complete black W-a. Black W-b can then still start, targeting $3,830+/-80 ideally, before W-c to $4,450-4,600 takes hold.

However, for this option to stay alive, the index should not break below the Nov. 25 high at $4,034 from current levels as that would mean overlap with the potential grey W-i. It should remain above this week’s low at $3,937 at all times. Otherwise, the index will have already topped per the EWP count shown in Figure 2 below.

Figure 2:

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

Sideways price action always leaves things more open to interpretation from an EWP perspective than a trending market, be it up or down. This week’s low, instead of the Nov. 17 low, could have been green W-4. In that case, it was what’s called in the EWP an irregular running flat (see here).

That, in turn, means that yesterday’s rally into today’s open was green W-5: all of the black W-a is close to completion. Today’s high would make for a perfect green W-5 = W-1 relationship (dotted green up arrow). A break below the Nov. 29 low at $3,937, with a first warning for the bulls below $4,034, will confirm this option. I then expect a pullback to $3,795+/-75 for black W-b before the next rally (black W-c) takes place to $4,350-4,475.

In conclusion, the last two weeks’ sideways price action combined with yesterday’s breakout allows for a final push higher, to possibly as high as $4,200+/-25, before the next larger pullback to $3,830+/-80 kicks in. But the bulls will have to hold $4,034 and $3,937 for now because the bears will take the ball and run it down to $3,795+/-75.

With S&P 500 Rally Continuing: Was That All the Pullback We Got?
 

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With S&P 500 Rally Continuing: Was That All the Pullback We Got?

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Comments (5)
Fa Cai
Fa Cai Dec 02, 2022 3:31PM ET
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Excellente!!! as Always!!!
Mr Doodl
Mr Doodl Dec 02, 2022 5:24AM ET
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Thanks for this accurate analysis.  I guess todays Nonfarm- payroll reading will probably decide if the bull flag was a running flat and green W- 5 is reaching the top.
Dr. Arnout ter Schure
Dr. Arnout ter Schure Dec 02, 2022 5:24AM ET
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thank you! So far the Bulls got there first warning by the index dipping below 4034...
Jeff
Jeff Dec 02, 2022 4:54AM ET
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Without volume it's directionless. Volume must pick up to make a meaningful call.
Dr. Arnout ter Schure
Dr. Arnout ter Schure Dec 02, 2022 4:54AM ET
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good point!
Ray Steed
Ray Steed Dec 01, 2022 7:13PM ET
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if it doesnt go up it will go sideways or down. if it doesnt go sideways or down it will go up. either way you will be right
Dr. Arnout ter Schure
Dr. Arnout ter Schure Dec 01, 2022 7:13PM ET
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Again, it has nothing to do with me being wrong or right. I couldn't care less about that. This is not about my ego. This is only about understanding the market's next likely move. Please see my comment to Larry Li below...
John Berry
John Berry Dec 01, 2022 4:07PM ET
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Bears are weak. They can't run nothing down. They been trying for weeks now.
 
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