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This week will set S&P 500’s tone for September
By: Avi Gilburt | September 5, 2017

Following the Elliott Wave analysis:

More of a pullback before a final push to S&P 2,600?

As I have said for over a year, this market is likely destined to be heading to 2,600 on the S&P 500. But, the question is if we can see more of a pullback before we head to that next major target region?

Since we caught the S&P’s SPX, -1.00% high on Aug. 8, we have been able to identify just about every twist and turn in the market. It has been a good month for us. In our weekend analysis on Aug. 26, we were preparing for a potential drop down to the 2425/30SPX support region, which would set up a rally back to the 2465-75 region. Well, the market bottomed at 2428, but it exceeded our target region by approximately 5 points on Friday.

The question now on the table is if the pullback to 2415 on the SPX is all we get, and the rally to 2600+ has already begun, or if we will get the rest of the pullback we expect next to the 2380-2400 region?

While my primary expectation at this time is still looking down, we will need to see the 2465 level broken as support, with follow through below 2459 to open that door down to 2380-2400. Any pullback that holds support over that region can point us back up towards the 2485-2500 region.

Again, I want to stress, as I have for well over a year, that the market is destined to head up to the 2600 region on the SPX in the next major rally. The question is how deep of a pullback will we see before that begins. And, as I have always warned, shorting for a pullback within a strong bull market is never advisable. Rather, one should be looking for opportunities to buy good set ups in individual stocks during these types of pullbacks.

With the market giving us the rally we expected into the holiday weekend, it is quite stretched as of Friday. So, at a minimum, I would like to see the market turn down to test the 2465/70 region. Should we break 2465, and follow through below 2459 this week in impulsive fashion, then we have our initial signal that we are going to test the next support region between 2380-2400.

However, if we only pull back correctively this week, and hold over support, it will point us higher to test the all-time highs again, for which I have added an alternative count on the daily chart (in yellow). And, I have to raise the probability of that potential at this time to 30%-35%, as long as we are over 2465 on the SPX. And, should we complete the yellow alternative count, it would make it a bit more likely that wave (4) can take us into the Thanksgiving time frame.

Ultimately, I think the first week of September may set the tone for the rest of the month.

See charts illustrating the wave counts on the S&P 500.

http://www.marketwatch.com/story/this-week-will-set-sp-500s-tone-for-september-2017-09-05

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