Can the Stock Market reverse and rally to highs?
David Banister- Chief Strategist,
Do the Bulls still stand a chance to make another run?
That is the question this weekend after we saw the 1340, 1322
pivots crashed right through following the "SP 500 Bear Case"
weekend report on May 13th I sent to subscribers with a chart
last weekend (May 13th SP 500 at 1353).
We ended the week with the SP 500 falling from 1353 to about
1292 and the US Dollar having rallied 13 of the past 15 days to
the upside. We also have The Mclellan Oscillator at extreme
oversold levels as in the November 2011 lows and close to the
August 2011 lows. The Sentiment gauges are running at only 24%
Bulls as opposed to the historic 39% averages, and the Percentage
of NYSE listed stocks trading above the 50 day moving average
plummeted to 12%. That is about as low as it has been during this
bull market, other than last August when we hit 5%.
So that means that the sentiment/human behavioral ingredients
are actually in place for a marked rally to the upside. What we
examine this week is whether that can still happen and what type
of Elliott Wave pattern would we need to see to validate it.
We can still make a case that this correction of 130 points
from 1422 to 1292 (about 9.1% similar to many Bull market
corrections since 2009 lows) is a wave 4 correction of waves 1-3.
Wave 1-3 rallied in total from 1074-1422 and a 38% retracement of
that entire cycle would put us right around 1291/92 pivots.
So below we have the chart that the Bulls would hang onto as
possible for a dramatic recovery to new highs past 1422 and
onward to 1454 or so. This needs to begin very shortly though and
much below 1285 we can wipe this idea off the slate in my
So, last weekends Bear View is now a 50% probability and the
Bullish count below is also 50%. The good news is I think we will
know which one is taking control very early in the week. This is
probably not a good time to place a big bet just yet in either
direction, we are at an inflection point.
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