The S&P 500 closed slightly below 2073 last Friday, April 1st, to end a week, during which the bulls managed to add another new high to the uptrend, which started from 1807 back in February. So, at first glance, all the evidence was suggesting more strength could be expected this week. The problem is that in trading, the first glance is usually not enough. That is why we prefer relying on comprehensive Elliott Wave analysis. This method allowed us to see the warning signs the S&P 500 was flashing. We, in turn, warned our premium clients about the bull-trap by sending them the following chart on Monday, April 4th.(some of the marks have been removed for this article)
As visible, the Wave principle made us believe the index is ready for a pull-back. The explanation we attached to this chart had nothing to do with economic data, geopolitical events or FOMC minutes, which are usually used by fundamental analysts to explain literally all market moves. But this is technical analysis, so all we said was that “if this is the correct count, the bears might return in S&P 500 next week. The anticipated pull-back … has the potential to take the price down to the small Fibonacci levels of 23.6% or 38.2%.” We also mentioned the relative strength index, which was showing a bearish divergence between the last two swing highs. In other words, the above-shown chart was more than enough for us to form a bearish opinion. The next one shows how the S&P 500 has been developing since April 4th.
These charts do not need words. The bears woke up almost immediately on Monday and have been in charge ever since. Currently, the index is trading near 2037. The sellers have already taken out the 23.6% retracement level and seem to be on their way towards the 38.2%. The Elliott Wave principle once again demonstrated its ability to help traders successfully predict reversals. And this is just one reason why we rely on it. Chances are you are going to discover many more, if only you give it a chance.
What to expect from now on? What is the bigger picture saying? Is the S&P 500 going to continue even lower or the support near 2035 would turn out to be too strong for the bears to breach? Prepare yourself for whatever is coming. Order your on demand Elliott Wave analysis now or pre-order the one due out next Monday at our Premium Forecasts section. Stay ahead of the news in any market with the Elliott Wave principle.
