And I say 'likely' because there's no such thing as a sure thing in life, and especially in financial markets. What's interesting about Monday's action is that the
Nasdaq 100 lived up to my expectations, unlike the
S&P 500 and the
Russell 2000 which managed to stay above their recent lows. (See
Countdown). In retrospect, Monday's sell-off was probably an All-About-Apple affair.
So what to make of today's action? I strongly believe it was the real thing. Having already traced out an exhaustive
Elliott triple three pattern (or more accurately, a
triple zigzag), the
Nasdaq 100 continues to afford me the greatest degree of clarity. Mind you, there's no such thing as a Quadruple zigzag, barring an exogenous event that would trump what I feel is a rekindled bullish technical picture. From here, I expect the
Nasdaq 100 to resume its ascent towards higher highs.
In terms of the S&P 500, what I originally thought would degenerate into a
triple zigzag structure (chart 1 of
Countdown) ended up being a garden-variety
double zigzag that ended at the 1357 low on April 10th. The ensuing zigzag was
wave 1, and today's rally is part of
wave 3. I feel that
wave 3 will likely stall near this year's highs (~1420), setting the stage for a shallow
wave 4 (given that
wave 2 was relatively deep). Along the way, you should expect some minor pullbacks, but it's advisable that you stay the course and ignore the noise (of course, set a protective stop).
Chart 1. The wave structure of the S&P 500. The uptrend has likely resumed.
As for the
Russell 2000, over two months' worth of sideways action traced out a pair of Rounding Top formations, neither of which could produce a breakdown. This is a bullish manifestation that should be thought of as a pause while the Russell 2000 regroups ahead of the next sustained trend. Please refer to
Thomas Bulkowski's guidelines pertaining to the Rounding Top pattern. In short, a Rounding Top can produce a breakout in either direction. However, once 32% of the cup is retraced, a signal to trade the long side of the market is automatically triggered. Always exercise caution and apply strict money management rules as nothing is guaranteed!
Chart 2. The chart pattern of the Russell 2000 appears to be consistent with what George Lindsay referred to as a SM (Sideways Movement).
Trade Well,
Peter (Twitter: @61Point8)
P.S. I publish my thoughts, analyses, and trades primarily for my own benefit, hoping it will also benefit others who might be seeking some guidance. Retweets are always appreciated.