Not a Last Gasp

On Monday, the S&P 500 rallied 1.8%, ending a three-day losing streak. The 8:1 positive breadth ratio was the best in five weeks, but total volume was the lowest in two months.

From an Elliott Wave perspective, the last several days have been very interesting. After peaking at 1080, we felt that the index had completed the pattern from at least the September 2 low or perhaps the August 17 low. Regardless, the evidence suggested that a significant reversal was not at hand, with important support in the 1048-1038 range. Since then, the index declined on five waves into Friday’s 1041 low (holding support) before today’s rally. And today’s rally, which retraced almost exactly 61.8% of last week’s decline, also has an impulsive look to it.

S&P 500



Since we see no conclusive evidence that the pattern from the September 2 low has been completed, we are going to continue to give it the benefit of the doubt. Thus, the potential for an impulse wave from last week’s low still exists. However, if the S&P fails to rally to new highs and/or establish an impulsive rally and then breaks back below 1041 it will lock in that post-September 2 uptrend as a complete structure and pave the way for lower reaction lows.

That said, and as mentioned in the recent STR, the uptrend for the bear market rally from the March low is intact, while both near and medium term momentum oscillators are still in positive territory. There are negative momentum divergences, but the Elliott Wave pattern has yet to deliver an acceptable count. Thus, despite mounting pressures, we believe that the S&P is not in position for a significant reversal.

Below 1041-1038, second support is apparent at 992-991. The July low (869) continues to be tactical support.

First resistance is 1075-1080. Second resistance is 1121-1156.