Technicals, US Markets

S&P 500 May Look To Extend Gains From Golden Cross Over Medium Term

The Dow pattern remains bearish as the decline from the June high at 8878 can be counted as an impulse (5 waves).  A corrective rally is in its latter stages now.  Expect resistance from Fibonacci at 8642.  This is the 61.8% retracement of the decline from 8878 as well as where waves A and C of a zigzag correction would be equal.

The Dow broke above resistance at the 200-Day SMA at 849 which casts some doubt on our contention that a head & shoulder’s pattern is forming. 8,250 is the key level, a break below there could lead to a test of 7,962 -38.2% Fibo of 6,470-8,877.

The S&P may take out its June high of 956.  The decline from that level is best counted as a 3 wave correction, so confidence is lacking in the bearish count.  Still, a potential head and shoulders top is evident and the decline could expand into a leading diagonal.

The S&P 500 has continued to trade higher since the formation of a Golden Cross which is the 50-Day SMA rising above the 200-Day SMA. We could see the broader index fall to as low as 826 April 21st low with a break below.

The Nasdaq is in the same position as the S&P.  The advance above 1836 confirms that the decline from 1880 is a 3 wave correction.  However, as mentioned in the S&P analysis, the index could continue to decline in a leading diagonal (which is rare).

The Nasdaq continues to trade higher after bouncing from support at 1,750 as we has expected. The break back above 1,800 is putting our theory that a test of 1,665 is imminent in doubt. However, a failed test of the June 11th high of 1,880 could lead to a sharp reversal.