Magazine article Modern Trader

Tech Talk: S&P 500 Hits a Crossroad

Magazine article Modern Trader

Tech Talk: S&P 500 Hits a Crossroad

Article excerpt

The S&P 500 Index found itself at a crossroads in July, with action over the latter half of the month likely to set long-term direction. After the sell-off in June, the index had recovered to the point that a challenge of the May high of 1,370.58 seemed likely (see "S&Ps at crossroad"). A move beyond the previous high would indicate a move to the final leg of a five-wave uptrend, while a failure to set a new high would establish a double-top formation.

As of this writing the first possibility seems the strongest. The first wave of the five-wave uptrend ran from the March 2009 low of 666.79 to the April 2010 high of 1,219.80, followed by the second-wave retracement from the previous high to the July 2010 low of 1,010.91. The third wave took the index to the May 2011 high before the abrupt sell-off to the June 2011 low. A move beyond 1,370.58 could trigger the fifth wave, setting up a possible test of the October 2007 high 1,576. …

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