SP500 – Daily Analysis
SPX continued higher, and at first glance, there are no obvious visual concerns. But the real question is what is happening under the hood of this engine.
In today’s report, we review the candle picture, examine the next technical targets, and run statistics on recent events. The focus is not on headlines, but on the statistical and technical backdrop behind the move, and whether the rally remains as healthy as it looks on the surface.
CANDLES
All indices advanced today, but the candle formations show subtle differences.
SPX formed solid bullish continuation candles on the daily and 2D frames, signaling continued strength, and is now approaching a 50/100 DMA bullish cross.
DIA and IWM, however, were not able to negate the Bearish Engulfing candles they formed last Thursday. Even though their trends remain bullish, the candles have not yet made a clear decision.
QQQ continued advancing in its own universe. I am afraid it may indeed be “different this time,” and the parabolic flight could continue. However, the index is now extremely overbought. The daily RSI climbed to a level not seen since February 2018, a move that triggered a sharp 12% pullback in just a few days. While most similar excursions into extreme overbought territory led to abrupt pullbacks, not all of them were large or prolonged. This means that a short-term pullback is highly probable, and would undoubtedly affect SPX, but the mid- and long-term health of the index remains stable for now.
Overall, SPX and NQ are bullish in the short term, with an elevated risk of reversal. Dow and Russell remain neutral, pending a decision. The mid- and long-term stance remains bullish until reversed.
Elliott Waves
No changes to the SPX impulse after the weekly assessment. At this point, the wave shows no strong reversal signals.
However, the technicals suggest that it could be either the final subwave of wave 3 in green or the final wave 5 of the entire impulse off the March low in blue. The wave could still extend further toward the 3.618x level, so we should continue tracking for confirmed reversal signals, particularly in the candles.
SUMMARY
SPX remains bullish, with no strong reversal signals in either the candle structure or the Elliott Wave count. The index continues to advance constructively, supported by solid daily and 2D continuation candles, while the broader mid- and long-term stance remains bullish until reversed.
At the same time, the rally is getting stretched. The current impulse could be either the final subwave of wave 3 or the final wave 5 of the entire advance off the March low, with room to extend toward the 3.618x level. For now, the focus remains on confirmed reversal signals, especially in candles, as the risk of a short-term pullback continues to rise.
