fter the recent big decline in the market I see that the S&P 500 is trading up again on Wednesday.
In speaking with a member this morning, we were talking about a possible upside target the S&P 500 before the market starts to move down again.
Let me walk you through what that might look like.
Let’s start off by using the major move from the April low to the recent July high.
Typically, when a market retraces a significant move it usually hits a Fibonacci target.
A small retracement would be 25%, while normal retracements are usually 38.2%, 50% or 61.8%.
In this particular example, the retracement was even more significant as it dropped all the way down to the 75% retracement level.
As you can see from the chart above, we traded right down to the 75% retracement level and bounced.
It’s not very often that markets make this large of a retracement unless something else is going on.
Now from an Elliott Wave point of view, Our analysis suggests that we’ve completed 3 waves down.
The next move would be a retracement wave 4 up, and then an ultimate wave 5 down breaking the recent low.
Based on the data we have up until Tuesday’s closing price, you can see where Elliott wave is projecting a retracement up to the 2 -4- lines.
Yesterday’s high traded right up into that range.
I put my cursor right on the upper line, which is at $531.62.
As of 2 PM Eastern time Wednesday afternoon, the high the day so far it’s been $531.59.
Another way of looking at this data is to measure from the recent high, down to Monday’s low, and calculate the retracement values for a move up.
This gives us a slightly different target of $531.15.
If the market is able to break through that level of resistance, you can see the next 2 targets above.
It would be quite normal to expect a retest of Monday’s low. If that doesn’t hold, here are the next downside targets using Fibonacci Projections.
As you can see, these projections would take out the April 2024 low of 493.86.
Now one of the reasons that we don’t use this type of analysis on a daily basis, is because it can change on a daily basis..
I prefer using our method of setting price targets as they can remain consistent over time.
Using our current chart from the website, you can see that are next upside target was $531.25.
And you can also see the downside targets if and when the required.
We typically put more emphasis on targets that are both daily and weekly.
Here is our weekly chart from last Friday.
As you can see, Monday’s trading action took us down below $531.25, and back up to that level today.
Without new information contradicting this theory, I believe that the market had a major decline in the Monday’s low, and we had a normal retracement for the past two days which may have come to an end today.
Monday’s low has to be respected until it is broken, if it breaks then look for a significant move down to at least the April low.
Stephen Whiteside
TheUpTrend.com
Wednesday, August 7, 2024
