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Amateur Investors Weekend Stock Market Analysis (3/26/11)

http://www.amateur-investor.net/Weekend_Market_Analysis_Mar_26_11.htm

For those that follow my daily updates I mentioned the possibility of an Expanding Diagonal pattern in the S&P 500. On Friday the S&P 500 did break above the top of its expanding channel.



However I also mentioned the Dow did the same thing back in early 1939 as it briefly broke above the top of its expanding channel to complete Wave 4 which was then followed by a sharp 5th Wave.



For this pattern to pan out the S&P 500 would have to reverse strongly back to the downside early next week with an eventual target for the 5th Wave around 1218. 1218 is at the 200 Day EMA (green line) and near the 38.2% Retracement Level from 1011 to 1344.



Meanwhile if the move down from the 1344 level is just a minor "abc" correction instead that means the S&P 500 still has a chance to make a new high as this was just a Wave 4 pullback which would be followed by the 5th Wave.



The longer term chart still suggests the rally from the March 2009 low of 667 is a larger "ABC" Zig Zag pattern corrective pattern. "C" Waves are supposed to be composed of 5 Waves so if the S&P 500 were to make a new high this Spring that should complete Wave 5 of "C" somewhere between 1353 and 1382. 1353 is where Wave "C" would have a length that is 61.8% of Wave "A". Meanwhile 1382 is the 78.6% Retrace (red line) from the October 2007 high of 1576 to the March 2009 low of 667. Also keep in mind if Wave 5 of "C" has a length similar to Wave 1 of "C" (118 points) that equals 1367.