By Avi Gilburt
Almost all of 2016 has been playing out in textbook fashion, other than how long some of the corrections have taken. So, as we complete November, I would like to see yet one more pullback into the end of the month to fill in a wave 2 of (iii) of (3), before we begin the December melt-up phase right before Santa comes to town.
As you can see from the 60-minute chart linked here , the market is again sitting just below its resistance region. My primary perspective is that the market is completing wave 1 of (iii) of (3). This means that we "should" see a pullback down to an ideal target of 2125 on the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.54% , which has confluence with the next higher target box on the chart for wave 3 of (iii) of (3). And, yes, that pullback would set up our "Santa Rally," which points us to the 2280-2300SPX region next.
Several of our other analysts at Elliottwavetrader.net also see the potential for this pullback into the end of the month. Princely Mathew, who finished in second in the World Cup Trading Championship last year and heads up The Smart Money at EWT, uses a collection of proprietary indicators that provide insight into how the “smart money,” or institutional money, is positioning themselves. Based on these indicators, Princely expects a pullback to materialize over the next several days into a low around the end of November time frame.
Also, Victor Nguyen, who uses a fractal algorithm to identify turning points in the market, has issued a "daily sell" signal for the stock market, which is also supportive of the primary wave count. Lastly, Dr. Cari Bourette of Marketmood.net also sees weakness into the end of the month based upon her algorithm which tracks market sentiment.
When we have a confluence of analyses all pointing toward a pullback to be seen over the next two weeks, it suggests the probabilities are strongly in favor of such a pullback.
Alternatively, I have to note that the move in the Russell Index (my equity trading vehicle of choice) has been so technically strong that there is potential for the market to simply grind higher from here without allowing the SPX to break back below 2155. Should the SPX be able to move through its resistance region noted on our 60-minute chart, then we will not likely see any appreciable pullback/consolidation until we reach the 2280-2300SPX region.
So, as the market prepares to welcome back Santa after his hiatus last year, we may get one more pullback before we begin the major breakout we expect in the equity markets on our way to 2537-2610 into the fall of 2017. While my prior support for the larger-degree bullish perspective was 2030SPX, I am now moving that up to 2080SPX this week.