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S&P 500 Between a Rock and a Hard Place

This week is a disappointment in the making for S&P 500 bulls. Soon after the index climbed to a new multi-month high above 2120, the rally lost momentum, causing the prices to fall back down to 2099 so far. And since there is no point in searching for the reason for S&P 500’s false breakout, we are going to focus our attention on whether it could have been predicted on time or not. And the answer is “it depends”. If you rely on economic news and events to tell you where the market is going, you are likely to be left empty-handed. On the other hand, our premium clients received the following Elliott Wave forecast on Monday, June 6th, before the markets opened.
sp500 6.6.16
The Elliott Wave Principle postulates that every 5-3 wave cycle is followed by a new wave in the direction of the five-wave sequence. That is exactly what the hourly chart of S&P 500 allowed us to see. An impulse in five waves up to 2105, marked with A, preceding an expanding flat correction in wave B. According to the theory, wave C of (Y) to the north should be expected to take the price to a new high, before the bears return. As visible, 2120 was the anticipated reversal area. The updated chart below shows how the situation has been developing during the last five trading days.
sp500 10.6.16
The bulls climbed to as high as 2120.55, where wave C appears to have ended. Soon after that, the reversal the wave analysis warned us about occurred. The Elliott Wave principle once again proved to be unbelievably accurate in what is probably the most difficult part of market forecasting – reversal prediction. On top of that, all you need is a chart. And while there is definitely a noteworthy support near 2100, the major resistance around the all-time highs should not be underestimated, as well. The market has a decision to make.

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