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The question in the headline of this column might be on your mind. It certainly feels as if stocks have the momentum to keep rising.
As for Elliott Wave analysis, we are again in a minor 3rd wave rally. Still, I believe we’ll see the 2,400-point region on the S&P 500 SPX, -0.08% in the not-too-distant future once we complete all of wave (3).
The current rally off the Sept. 25 low is best counted as wave (iii) of iii of 5 of (v) of (3), which you can see on the daily chart. Also, since this wave (iii) has now extended beyond its standard extensions, it suggests that the market may be stretching to push to the next major larger-degree extension in the 2,611 region.
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In fact, for those who have been following us for several years, you will likely remember that we were looking for the rally off the February 2016 lows to target the 2,537-2,611 region. While I was initially thinking that all 5 waves off the February 2016 lows may complete within that region, this current rally is making it quite likely that this target, which we set in 2015, will likely only be the top to wave (3) off the February 2016 low, with wave (5) potentially taking us toward the 2,800 region.
But just because it “feels” like the market may not come down again does not mean it won’t. Once this gray wave (iii) completes, I believe we will see a re-test of the 2,511-2,520 region in wave (iv), also outlined on the daily S&P 500 chart. In fact, I believe we can see this re-test take shape over the coming week or two.
Moreover, as you have likely heard me say so many times lately, as long as the market holds support, we are likely headed to the 2,570-plus region. If the market holds its next test of support in the coming weeks between 2,511 and 2,520, we will likely be setting up gray wave (v) of iii, taking us at least toward the 2,565-2,575 region.
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Alternatively, as we have also discussed many times before, should the market want to complete wave (3) as an ending diagonal, then we will need to see a strong break down below 2,511, with follow-through below 2,496. That would signal that wave (3) has likely ended, and wave (4) has begun.
But, as I have noted, bullish investors still have the ball, and until they fumble by breaking upper support of 2,511, it would seem the market is attempting to stretch toward the 2,611 region as we move into the end of 2017. And once this wave (3) completes, we will likely be faced with a multi-month wave (4) pullback with a minimal target in the 2,400 region, and an ideal target within the 2,330-2,380 region. That pullback will likely set up the wave (5) rally into 2018, which seems to now point to the 2,800-plus region, and may extend this rally into 2019 before we see a 15%-20% correction.
Remember, this is a bull market and should always be treated and respected as such. It is still quite likely that this long-term bull market, which began in 2009, will likely take us beyond the 3,000 region in the next five years before we experience our next true multi-year bear market, as you can see on the attached monthly chart.
See charts that illustrate the wave counts on the S&P 500.
Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net, a live trading room featuring intraday market analysis on U.S. indices, stocks, precious metals, energy, forex, and more, along with an interactive member-analyst forum and detailed library of Elliott Wave education.