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S&P500 made a five-wave rise from the 2185 level, where a higher degree wave (IV) correction found support. That said, the mentioned five-wave rally can be an indication of where the trend can be going; to the upside. If that is the case, then we should be aware of further upside on the stock market, however, we should also be aware of pullbacks.

After a five-wave recovery develops, price starts to form a temporary pullback, a pause within a trend. In our case, this can already be happening, as higher degree wave A/1 with a five-wave move looks to have found a top at the 3234 level. Now, we are observing a three-wave set-back to occur in a wave II/B, with possible support/bullish reversal zone at the 2870/2600 region, where former swing low of a wave 4, and Fib. ratios of 38.2/61.8 can react as support.

All being said, after wave II/B fully develops, and we see a rise in five waves of a lesser degree, that is when bulls can regain control.

S&P500, daily