The S&P 500 has closed lower 5 months in a row although it didn't make a lower low in September as so far the longer term 38.2% Retrace from 667 to 1371 has held near the 1100 level. When looking at a monthly chart which gets rids of all of the daily volatility one could argue we are seeing a 5 Wave pattern from the 1371 peak which is missing one final Wave to complete the pattern. The target zone for the possible 5th Wave would be in the 1042 to 1011 range. The lower end of the range would coincide with the low made in July of 2010 at 1011 (point A) while the 50% Retracement Level from 667 to 1371 is at 1019.
Meanwhile the higher end of the range would correspond to the 200 Month EMA (green line) which is currently at 1042. In the past the 200 Month EMA has acted as support such as back in July of 2010 (point B) and further back in late 2002 (point C) although it failed to hold in late 2008.
Finally for those watching the Volatility Index (VIX) it has been consolidating over the past 7 weeks which has led to the formation of a Cup and Handle pattern. Naturally at some point the VIX is going to to make another significant move either to the upside or downside as it breaks out of its Handle. If the breakout is to the upside then the S&P 500 would test the next support zone mentioned above in the 1042 to 1011 range.
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