The S&P 500 reached an interesting junction after a strong rally. More upside is likely, but the question is when and how.
The rally has been unfolding for almost two trading weeks. It might have started stalling during the past few days. Tech stocks were strong and dragged the S&P 500 into a new high today. However, strength indicators diverged and hinted at potentially fading buying interest. Moreover, small caps and the old economy lagged and did not confirm the new high so far.
Weakening momentum and non-confirmation could get discarded if the S&P 500 traces a 1-2-1-2-3 setup and spikes higher by the end of next week. The black path shows how this scenario could unfold. Two technical aspects will be critical: The 4400 S/R must not break down sustainably and lagging indices must confirm a new recovery high.
Otherwise, the red scenario remains the most likely alternative. It shows how an expanding leading diagonal unfolds. A fourth wave of minute degree could shake the tree and do some damage. That scenario could be a gift for swing traders if we see 4290 not break down sustainably.
The rally has been unfolding for almost two trading weeks. It might have started stalling during the past few days. Tech stocks were strong and dragged the S&P 500 into a new high today. However, strength indicators diverged and hinted at potentially fading buying interest. Moreover, small caps and the old economy lagged and did not confirm the new high so far.
Weakening momentum and non-confirmation could get discarded if the S&P 500 traces a 1-2-1-2-3 setup and spikes higher by the end of next week. The black path shows how this scenario could unfold. Two technical aspects will be critical: The 4400 S/R must not break down sustainably and lagging indices must confirm a new recovery high.
Otherwise, the red scenario remains the most likely alternative. It shows how an expanding leading diagonal unfolds. A fourth wave of minute degree could shake the tree and do some damage. That scenario could be a gift for swing traders if we see 4290 not break down sustainably.