2/5/2014

After a very small upward move to 1755 on Tuesday, the S&P 500 has been trading between near 1760 on the upside, and 1740 on the low as of Wednesday's close. All this is doing is simply building a bear flag that is likely to break this week. Given the speed and degree of the last two waves down, the next move down should settle nicely at the 200 Day MA, which is now at 1710.

There is a possibility of testing the 1765 tomorrow, but such a move should be factored in based on the daily channel.

If the post 1850 declines started a new Elliot count, then this next decline could be wave 5 on the daily, and potentially complete wave 1 on the weekly. The weekly wave 2 will probably test old supports around 1770-1800 (more like 1770 if we are going to break the channel from November 2012 - thus causing it to act as resistance) and retrace if it is simply a wave 2. Will be interesting to see what pans out.

The low for this sideways pattern is 1738 (almost exactly 30 points lower than the last flag), but a break below 1735 will seal the deal. Anything up above 1770 and I'd reconsider the bearish scenarios below.

S&P 500 Daily Chart

S&P 500 Weekly Chart