I expect a ‘healthy’ decline in stocks to begin soon By Avi Gilburt | July 31, 2017
Following the Elliott Wave analysis:
U.S. stocks have just about reached a long-term target
While I have been bullish for a long time, U.S. stocks are now approaching our target zone. You might want to consider being more cautious.
By no means do I believe the bull market in stocks is coming to an end. Still, I expect a healthy pullback to begin soon.
For those who have followed me over the years, you would know that our minimum target for our blue box on our daily S&P 500 SPX, -0.07% chart for wave (3) started at 2,487 points. And, as I warned over the past few weeks, the market’s recent rise, which began almost a month ago, would begin to slow.
This past week, after the market tacked on 20 points in a slow grind, it slightly exceeded the 2,484-point level. So it just about struck our long-term target, and we should now become more cautious.
The market completed what could be this whole rally last week, and it reacted strongly to the downside. However, my primary expectation is that we should see one more smaller rally to new highs, likely starting later next week. But I only maintain that expectation as long as this pullback remains over the 2,450/2,455-point support region.
However, if we see a strong break below 2,450, with follow-through below 2,440 (before we are able to attain the 2,500 region), then we have to strongly consider that the top has been made, and a multi-month pullback toward the 2,300 region has begun sooner than I had expected. Yet I still fully expect that pullback to be seen in the coming months, and my primary expectation is that we’ll see one more push up toward the 2,500 region first.
In summary, I believe we are completing a main segment of the rally, which began at our February 2016 lows right into the target region we have been focused on for years. Once this top is struck, I expect a healthy pullback, which will set up the next rally phase, likely taking us up toward the 2,600 region into 2018.
See charts illustrating the wave counts on the S&P 500.
The writer has no holdings in any securities mentioned.
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