A Refreshed S&P Challenges 920

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The S&P gained 1.7% on Wednesday, supported by fairly broad participation (16 of the 24 industry groups were higher) and a solid increase in volume. In addition, both the S&P small cap index and the NASDAQ closed higher while experiencing an “outside day.” This combination is viewed as a bullish reversal and often does have positive implications.

We still do not see any significant red flags. Momentum is constructive, many sentiment indicators are positive, breadth is confirming – even leading – the indexes, and cycles still have a bullish bias. All of this suggests that the rally may be in position to remain intact for another 2-4 weeks. So, we remain of the view that higher highs are likely in the days (and weeks) ahead.

We have made the cases that, since April 21, the hourly patterns have had an impulsive quality to them from an Elliott Wave perspective. This trending quality is another plus. The current “wave” has been in force since May 1 and has hourly support at 910-909.

From a bigger picture point of view, we have no changes to our March-May resistance and support levels. The S&P did make a “peek-a-boo” move though 919, but 944 remains our main focus; we discuss that in some detail in the new Insights. It is not a stretch to suggest that other resistance levels are relatively irrelevant. We believe that 944 will be violated.

Key support relative to the current upleg from the April 21 low is at 848-847.