Technical charts signal the S&P 500 may top 2,600 next year
For those who follow Elliott Wave analysis
* November 15, 2016
Next chart target is around 2,300, says Avi Gilburt
We certainly had a wild week. In fact, I am still laughing at the market action.
As I warned you a week ago, the market was completing an ending diagonal in our target pullback zone, and the move out of that diagonal would be a “violent move in the opposite direction, which takes us back to the point from which it began and it does so very quickly. That means that once we complete this diagonal down, and the market turns up strongly, it ‘should’ not stop until we get back toward the 2180SPX region.”
On Monday, the market provided us exactly what we were looking for — a massive and “violent” move off the lows to let us know that the pattern to the downside had completed. Moreover, the move up was what we call “impulsive,” which provided further strength to the bullish thesis and structure.
Then it happened. Trump shocked the world by winning the election. While the election was swinging in his favor, the S&P 500 futures began to tank. In fact, they dropped over 100 points, and actually targeted the lower end of the target region we set for this correction months ago.
As we were hitting bottom, I noted in our Trading Room at Elliottwavetrader.net that I have seen action like this in the futures a handful of times over the last 10 years and that by the market open on Wednesday we could very well be right back to where we were at the close on Tuesday.
Amazingly, even before Trump was announced the winner of the election, the futures market bottomed and began to rise. No one could come up with a good reason why it began to rise, as it was still the same Donald Trump that was winning the election that supposedly caused it to decline. And, yes, we not only opened near where the market closed on Tuesday, we even added another 24 points of gains that day.
Ultimately, the cash index showed no indications of what occurred on Tuesday night, and we always view “cash as king.” Moreover, the pattern in the cash index continued to rally last week, and we struck the high we were targeting in the 2180 region in the S&P 500 SPX, -0.01%
As long as the market maintains over support noted on the 60-minute chart, and we follow through over resistance, we are heading to our next target between 2280-2300SPX for wave 3 of (iii). That then will set us up for a pullback toward the 2220SPX region, with the next higher target being in the 2370-2400 region to complete wave (iii) of (3). This will likely take us into January of next year.
As the market continues higher, we will continue to move our support higher. At this point, it would take a break down below the Nov. 4 low in both the S&P 500 and the Russell 2000 RUT, +1.26% to invalidate the current setup we now have, which is ultimately pointing to the 2537-2610SPX region in 2017.
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