SP500 – Daily Analysis
In today’s Daily Report, we break down the market’s internal mechanics, track the signals developing across key timeframes, and pinpoint the levels that could decide the next major move.
CANDLES
I initially wanted to post the Dow and SP500 monthly reports, but with only Friday remaining to shape the weekly candle, which should provide important mid-term guidance, I decided to combine the weekly and monthly outlooks over the weekend.
Nevertheless, the market delivered a very strong bullish message today. The monthly candles formed strong Bullish Engulfing patterns, signaling a full recovery from the 3–4 months of bear market, depending on the index. Together with the strong 2M and 4M bullish signals, the market is setting up for a bullish summer and possibly fall.
The path upward will likely not be smooth, and pullbacks, possibly multi-week ones, should be expected. Still, the odds of a sound bullish rally are quite high. May is expected to carry the initial bullish momentum from April, and some indices could form candles of similar size.
For SPX and other major indices, the long-term trend is bullish. The short- and mid-term outlooks will be discussed in the weekly report.
Elliott Waves
Possible Impulse
Three weeks ago, we began tracking a potential impulsive wave off the March 30 low. At this point, the technicals continue to support the hypothesis that the most recent wave up was wave 3 of some degree.
The wave almost reached the 2.618x Fibonacci extension, one of the most probable targets for wave 3.
Potential Diagonal
Following yesterday’s discussion on the potential two-week-long diagonal in Nasdaq, I also reviewed SPX over the same period. The most interesting part is that SPX also struggled during the second half of April, and the formation can also be viewed as an Ending Diagonal in red.
At the same time, I cannot reject the possibility of a running flat, marked as abc in purple. Today’s break from the structure could be either the final spike of the diagonal or a breakout from an upward-tilted bullish flag.
I think tomorrow’s moves should bring more clarity and provide support for one of the scenarios. At this point, while there is some technical backing for the Ending Diagonal scenario, the signals are not as strong as usual.
SUMMARY
SPX closed April with a very strong long-term bullish message. The monthly Bullish Engulfing, together with strong 2M and 4M signals, points to a full recovery from the recent 3–4 months of bear market conditions and supports the case for a bullish summer, and possibly fall.
From an Elliott Wave perspective, the rally off the March 30 low still fits as an impulsive structure, with the most recent wave likely being wave 3 of some degree. The wave nearly reached the 2.618x Fibonacci extension, one of the most common targets for wave 3.
The short-term structure is less clear. Similar to Nasdaq, SPX struggled during the second half of April, and the latest formation could be viewed either as an Ending Diagonal in red or as a running flat, abc, in purple. Today’s break from the structure could be the final spike of the diagonal or a breakout from an upward-tilted bullish flag.
At this point, SPX remains bullish long term, while the short-term path needs confirmation. Tomorrow’s moves should provide important clarity and help determine whether the index is completing a diagonal or continuing the bullish breakout.
