Analysts at Wavetraders argue the S&P 500 could push higher in the near term, possibly toward the 7700 area, before a summer slowdown sets in. They tie a June consolidation and an Elliott Wave count together to map out where the rally may stall and where support could form.
The S&P 500 could break the trend line resistance connected from its June highs and climb further in the near term, possibly toward the 7700 area, according to analysts at Wavetraders. The index is currently testing that resistance, and a break would open room for more upside.
A seasonal pattern meets an Elliott Wave count
The setup rests on two ideas working together. Wavetraders had been calling for consolidation on the S&P 500 during June based on the seasonal pattern, and history shows that when stocks consolidated in June, they often broke higher during the middle of summer before another consolidation phase developed in August and September.
Combining that seasonal read with their Elliott Wave count produces the case for a move toward 7700. But the analysts caution that 7700 could become an important resistance zone, especially if the market starts consolidating again during August. In their view, that could follow a wave B rally as part of a larger flat correction.
Why the next correction may run longer
The team thinks wave four could become more complex after new highs are reached, because it is very rare to see wave four take less time to unfold than wave two. Wave two, they note, was a complex and overlapping W-X-Y correction, so the rule of alternation makes it very possible that wave four forms a flat correction instead.
If a decline arrives toward the end of the summer, the analysts see the 7200 to 7100 area as an attractive support zone where the market could stabilize before the larger uptrend resumes. The bottom line, in their words, is more possible upside in the short term, then greater caution once fresh all-time highs arrive toward the end of July.
Source: FXStreet
Trading involves risk.
Risk Disclaimer
