With the SPX holding support this past week, the market broke out through resistance, and seems to have begun its next rally towards 2800. But, the bigger question still looming before us is how much higher can this rally take us?
For years, we have had our sights set on the market exceeding the 3000 region before it completes all of wave 3 off the 2009 lows. The question the market will have to answer over the next two months is whether we will top just over the 3000 mark, or if we can set up to extend to the 3225SPX region by the middle of next year.
For those having followed our work, you would know that we are tracking two bullish potentials at this time. They are presented in yellow and in green on the attached 60-minute IWM and SPX charts. The yellow count suggests that we are rallying now to complete wave (i) of wave (5) of wave 3 off the 2009 lows. This would have us expect a larger degree pullback into the latter part of this summer for yellow wave (ii). Should this structure develop into the end of the summer, then it would suggest the market will project to the higher 3225SPX target, and likely take us into the middle of 2019.
However, if the market takes the more immediate green count path, it suggests we are now within wave (iii) of an ending diagonal in the SPX, whereas the IWM presents as a standard impulsive wave structure. But, it would potentially top us out in the SPX at the lower end of our long-term target zone on the SPX, which could even occur before the end of 2018.
So, for the upcoming week, as long as we do not see a major reversal below 2730SPX, my expectation is that we can rally back up towards the 2800 region to complete the a-wave of this rally off the 2700SPX support region. But, overall, it would seem that August will likely usher in a pullback, the extent of which will give us strong indications as to how high and how long this current rally will take us before the 20-30% correction we expect in 2019 will begin.
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