So Close, But …

… yet so far. On Monday, the S&P 500 rallied 0.4%. This was its sixth consecutive gain, which is the longest such string since June 2007. Breadth was positive by a 4:3 margin, while up volume was better than down volume by better than a 2:1 ratio. Despite the semi-holiday atmosphere, total volume was little changed from Friday’s level.

The day’s high for the S&P was 1079.46, which was just shy of its 1080.15 rally high. We would like to see the S&P cross its t’s and dot its i’s by moving to a new high. In that regard, the DJIA did eke out a new high and near term momentum has taken on a bullish bias for most of the S&P’s 24 industry groups, so the prospects for a higher high by the “500” would seem to be reasonably good. A rally through last month’s benchmark would satisfy what we believe are the minimum requirements for a complete pattern from at least the August 17 low and probably the July 8 low. We would also have to respect the possibility that the entire post-March rally was drawing to a close.

S&P 500 with 22-week Cycle
With that Elliott Wave consideration in mind, we also need to be alert to the idea that this week is the 14th week since the July low, which suggests that we need to be alert to the idea that the 22-week cycle is peaking. In addition to this time element, the weekly Coppock Curve is peaking and is positioned to take on a broad-based bearish bias before the end of the month; this suggests that the next short term momentum peak could also have bearish intermediate implication. Moreover, the sentiment environment has moved from skepticism four weeks ago to signs of excessive bullishness now.

All of this implies that the S&P 500 is on the verge of its largest correction since at least the May-June 2009 pullback and perhaps since the January-March 2009 decline.

We have been pointing to 1070-1080 as first resistance; while the index is testing that range, it has yet to clear it. Second resistance is 1121-1156.

As of now, the uptrend from the March low is still intact (the uptrend line is currently near 1029). First support is indicated at 1057-1051; second support is at 1020-1015. A decline through 992-991 will lock in the July-September rally as a complete Elliott Wave pattern. The July low (869) continues to be tactical support.