Last week, I showed you a chart of the Nasdaq 100, which is probably in the midst of tracing out a longer-term consolidation pattern (trading range), as it hadn’t traded below its November low. That range could be from the November 21 lows up to the January highs, possibly higher. 

This week, we’re going to focus on the S&P 500 (GSPC), which has traded below its November lows and bottomed out at 667 points on March 6.

By trading below 670, the index reached an intermediate-term downside price objective and set up a daily buy signal. Earlier in the week, that buy signal got triggered, meaning that there is now an 82% chance that the S&P 500 will trace out at least a three-wave Elliott move (possibly increasing to five waves) to the upside. As you can see on the chart below, we’re still in Wave 1.

Although the S&P 500 may move higher over the near-term, keep in mind that the index has risen sharply over the past few weeks and is due for a pullback soon. This would be Wave 2 of a three-wave move.

A normal Fibonacci retracement would come in between 38% and 50% of Wave 1. However, in a very bullish market, it may only pullback 25% to 30% before reversing back up.

Either way, when the current rally runs out of steam (which may have been yesterday), look for the index to see at least four days of price action below the Wave 1 high before new highs are possible.

In Elliot wave terms, if we’re only in a three-wave move up, this would be called an A-B-C rally, which is just a corrective move within the the downtrend.

However, if we’re seeing the start a five-wave rally, the S&P would have to close above the January highs. If you want to play a move at least above the highs of Wave 1, you can buy on the first decent pullback.

Source: Ticker Of The Week: S&P 500 (GSPC)