The S&P 500 has now rallied just above its 40 Week EMA (blue line) after completing Primary 1 in early March. The current move from the early March low is likely Primary 2 and the question is how far along is it at this point as there are two potential scenario's in the weeks ahead.
The more bullish scenario is that the S&P 500 is exhibiting just Wave A of Primary 2 which could be getting close to completion. This would then be followed by a B Wave pullback.
For now let's say the S&P 500 does stall out near its 40 Week EMA and then undergoes a Wave B pullback. The first support level would be around 880 which is at the 50 Day EMA (blue line) and 23.6% Retrace calculated from the early March low to the most recent high. Meanwhile if a deeper pullback occurs then the next support area would be at the 38.2% Retrace around 840. After the B Wave occurs then this would be followed by a C Wave to the upside at some point in the future.
Meanwhile the second scenario is that Primary 2 is nearing completion as Wave A peaked at 930 which was followed by a minor Wave B pullback to 879. This is now being followed by the final C Wave which could rise anywhere between 976 to 1014 before peaking. The 976 level is at the S&P 500's 12 Month EMA while the 1014 level is the 38.2% Retrace calculated from the October 2007 high to the early March low. Once Primary 2 ends then this would be followed by Primary 3 to the downside which would eventually lead to new lows at some point in the longer term.
As I talked about last weekend back in the Bear Market period from 2000-2002 the S&P 500 ran into strong resistance at its 12 Month EMA (points D) while remaining in an overall down trend until a bottom occurred in late 2002. As mentioned above the 12 Month EMA is now at 976 so that's going to be a key level to watch in the coming weeks. Also the current bungee jump rally looks similar to the ones that occurred from the Fall of 2001 through early January of 2002 and in the early part of 2001 (points C to D).
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