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).
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.