SP500 closed the week with the set of candles that could tell a lot, and it looks like SPX is ready for some large moves. Let’s focus on the direction and the targets for the next week or two.
This SP500 overview contains the charts and covers:
– TA and Japanese Candlesticks analysis;
– a mid term forecast for SP500.
Today I will use the monthly candle as a foundation for the forecast.
The March monthly candle was a bullish Engulfing, clearly closed above the February open and closed above 8 EMA. While the majority of indicators were bearish, the volume strongly supported the move. It means that the chance that SPX closes in April above the March close (forms a green candle) is quite high.
If we look at the monthly support line, we can see that the 20 EMA has been such support for 2 months. It is a trend – a small one, but a trend. And we can assume that 20 EMA could continue this function going forward.
There are 10 trading days left in April.
In such conditions the monthly could drop towards $4160, reverse and rally towards $4450 (about 7%) in order to keep the odds bullish or rally towards $4550 (over 9%).
Sounds like a rollercoaster: a 5% drop and a 7-9% rally. All in 10 days.
Are you skeptical about probabilities? If we look back just a few months ago. In February, SPX lost over 5% in just four days. In March SPX gained over 7% in just 6 days. Both events I marked with thick arrows on the daily chart above. Can the history repeat in the next 10 days? At least I cannot rule it out. The monthly candle backs it up.
The weekly and daily candles support the next move downwards. The odds are bearish.
The candles are clear. Let’s now have a look at Elliott Waves.
ELLIOTT WAVES – SP500
I charted these possible paths a few days ago and now decided to split the most probable path (blue) with the other two.
Blue: SPX is developing wave C of the correction that started in January. It is the primary count until invalidated. Note the $4160 is the mid point of the area of the most probable targets.
Green: This is a bullish count. While a motive wave count has been invalidated, there is still an option to develop the wave off the bottom as a diagonal i-v and a few signals would support this hypothesis. All we need is a higher high. If it happens, I would switch the primary to green. And we must remember that the diagonals tend to return to its origin. In this case, wave 2 would return to the beginning of wave 1, but must not cross below.
Red: An even larger correction – we know that the wave off the bottom is corrective. Wave B could even make a new ATH, but typically no higher than 1.236 of the length of wave A.
Quite a few paths to take and this situation is quite normal for the corrective waves – one of the reasons they are so hard to forecast.
Based on the monthly candles, SPX is expected to advance in April and possibly in May.
The weekly and daily odds are bearish.
Possible target area downwards: $4040-4265.
A very strong support – monthly 20 EMA – ~$4160.
Latest SP500 quarterly/monthly analysis:
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