The entire move from the March 2009 low looks to be a corrective "ABC" type rally. "C" waves are supposed to be composed of 5 smaller Waves so we have two possible scenarios. The first scenario is that the S&P 500 peaked at 1344 in February to complete Wave 5 of "C". "C" Waves by definition can have a length that ranges from 61.8% to 100% of the "A" Wave length. Thus if we take 61.8% of 553 points (length of A) that yields 342 points and adding that number to the Wave "B" low of 1011 = 1353 so the S&P 500 got within 9 points of that number.
Meanwhile the other scenario is that Wave 3 of "C" peaked at 1344 and the recent pullback is just Wave 4 of "C". This would mean we are missing the final 5th Wave to complete "C".
Now if we try and calculate a target for Wave 5 of C typically the length of the 5th Wave can range from 61.8% to 100% of the 1st Wave. In this case Wave 1 had a length of 118 points so 61.8% of that number is 73 points. If the recent low of 1290 holds then adding 73 to that number = 1363 for a first guess. Furthermore also notice the longer term 78.6% Retracement Level is near 1381 so that gives us an initial potential target zone of 1363 to 1381 if the S&P 500 were to make one more move higher to complete Wave "C".
Of course the question is how do we know which scenario is in play? The answer is we don't, however, if we are seeing a 4th Wave pullback from the 1344 high the S&P 500 should hold support at or above the 1272 level (blue line) which is the 23.6% Retrace from 1040 to 1344.
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