By Avi Gilburt
I cannot say that much has changed in the stock market over the last week, and our bullish bias will be maintained for 2017 as long as the S&P 500 remains over 2,205.
As I noted last week:
All year long, I have been telling anyone who has been willing to listen that the market is set up to rally this year, with an ideal ultimate target between 2,537 and 2,611 for 2017. And, even when I was reiterating this back at the end of January and February, most were still looking for that elusive stock market crash.
Take note that my expectations for a rally this year did not care about Brexit, who won the U.S. election, the referendum in Italy, or any other exogenous event . . . and it seems that neither did the market. The set-up for this move has been in place for some time, and while the market has provided some twists and turns along the way, most of which we have been able to identify before they occurred throughout the year, as a commenter to one of my articles noted, the ants go marching on:
Compare the market to a stream of ants marching by in, generally, a single direction. Run a stick across their path and there will be some momentary confusion and reaction to the direct stimuli but very soon afterwards the original parade of ants continues and the stimulus is forgotten.
The funny thing about this strong break out was that it was not ignited by any news, and it was being telegraphed the day before. In fact, early in the week, the market started giving us signals that it will not likely see much in the way of bigger pullbacks before we begin the "melt-up" I warned about last weekend, which was pointing to our next target in the 2,280-2,300 region.
As we approached within a few points of our next S&P /zigman2/quotes/210599714/realtime SPX +0.18% target in the 2,280 region this past Tuesday afternoon, I sent out an update preparing everyone at Elliottwavetrader.net for the pullback/consolidation I expected from that region. Since that time, the market has spent over three days in a wave iv consolidation. While we still have no indication that this wave iv has yet completed, as long as we remain over the 2220SPX region, my next expectation is a test of the 2306SPX level. Should we see a strong move that level, then it points us up toward the 2350SPX region to complete wave v of 3, potentially by year end.
This week, I have added an alternative count in yellow, which suggests we are actually one wave degree ahead of the green wave count. That means I have to lower our upper support to the 2205SPX level for the bull market, but it doesn't change our higher targets. And, much will depend on where this next pullback finds support in the coming week.
In conclusion, as long as the SPX remains over the 2,205-2,220 support region, I am going to continue to maintain a strong bullish bias into 2017, with targets exceeding 2500. And, as we move higher, I will move that support up, until we complete a full five waves off the low struck in February.
Based upon this perspective, and as long as support continues to hold, I don't expect the next major correction in the market to begin until 2018, which can usher in a 15% correction going into 2019.