Current Position of the Market

SPX Long-term trend: The uptrend should continue after pausing for a correction.

SPX Intermediate trend: “An ending pattern appears to be in its last stages of completion. This should be followed by an intermediate term correction into October.” The correction has started.

Market Overview:

After the 20-wk (40-wk?) cycle made its low on 8/21 (date adjusted from 8/10), SPX started a counter-trend rally — or a b-wave, after the a-wave low of 2417, if you prefer — and there is no conclusive sign that this rally is over. Most of the short-term indicators are still biased upwardly, and until we break the 2430 level (minimum), the trend is still up. If that is the case, the resumption of the uptrend should be early next week (perhaps Monday) and the index could reach 2479 before completing its retracement of the original decline to 2417. I am presenting you with the most bullish picture for the short-term, but would not do so if it did not offer the best technical analysis probability.

Assuming this scenario will be realized, that would complete the b-wave of the correction, and it would be followed by the c-wave which should ideally extend into October. Date-wise, the rally should conclude right around Labor Day. Therefore, you should be ready for a reversal to occur, especially if SPX makes it to the target stated above determined by P&F and Fibonacci projections; and even if it does not!

Analysis: (These Charts and subsequent ones courtesy of QCharts.com)

Daily chart

I have made some notations on the chart which best explain where we are and what is expected of the index over the next few days and weeks. It is a graphical representation of what is stated in the Market Overview. After the rally from 2417, we rallied to 2454, or 50% of the distance from the to — a normal retracement. Then we declined to 2436, another “random” 50% of the rally to 2454. We went on to retest the 2454 level and failed to surpass it by a fraction, which brought a little more selling. This has taken us to Friday’s close of 2436, and at a point where the index needs to decide what it wants to do next.