SP 500 has rallied up into the 1375/77 pivot areas as I had outlined to my
subscribers about 10 days ago on the weekend update as possible highs for C
wave up from the 1267 SP 500 lows of June. Many forecasters are now getting
very bullish, but I continue to see divergences with The Elliott Wave counts
and other indicators that are giving me some short term concerns, and then we
can determine if these are long term issues still for the markets.
Independence Day update shows a new chart pointing out prior “Recovery
rally highs” since the May 2011 1370 highs on the SP 500. In each case,
a major market correction unfolded when we had the NYMOT
indicators at these levels along with Stochastics, CCI, and other Fibonacci indicators I
incorporate at various times. Currently, we have the NYMOT indicators at a
reading of 307. To understand this in context, its the highest reading in the past two years.
Higher than the 1292 SP 500 rally high in October 2011 (From 1074) and higher
than any other rally high in the past 24 months.
to that, we have the Stochatics indicators at
extreme short term highs and the CCI index is nearing the levels it read at
the recent 1363 pivot highs. Finally, further puzzle pieces continue to show
divergences in the Elliott Wave patterns. The rally from 1267-the current
1375 levels can’t be interpreted in my opinion as a 5 wave rally (which
would be bullish), instead its an overlapping 3
wave rally in my views., or a double zig zag. These types of rallies
are corrective rallies against a prevailing trend, which was down in to early
rally to 1375 areas is actually in the zone I discussed a few weeks ago, and
still in the 1386 or lower Fibonacci zone I’ve outlined as a C wave
target for an ABC rally from 1267 June 2012 lows. My work still gives a model
of 1422-1267 as 5 waves down, and 1267-current as a zig
zag corrective pattern up. The market will soon tip
it’s hand I think after this holiday week is
over and we see a bit more volume return next week.
all of this said, it is difficult to be too bearish given the 52 week highs
in many blue chip stocks as well as the strong advance-decline lines and
recovery in some of the tech stocks of late. When you get a lot of
conflicting signals like this, I try to fall back on a variety of indicators
and clues to help clear up the clouds of the market.
conclusion, near term I will be very surprised if at a minimum we do not have
significant pullback in the market next week. The rally could sneak a bit
higher during this holiday light volume week, so lets look to next week for volumes to return and
tell the tale. Taking some gains off the table in the coming 1-2 trading days
is probably not a bad move.
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