Updated - added: Less than 5% upside for FTSE100 ?
Key overhead resistance and updated projections
The broader stock market managed a new recovery high, with the Dow briefly touching 11000 Friday. The SP500 index has advanced 1.38% over the past week.
Stocks are in the neighborhood of a couple of big-picture resistance levels discussed in Projections (4/1/10). “In terms of wave relationship at a larger level, note that the 0.618 retracement of the Oct07-Mar09 sell-off is 1228.74, and 1245.67 is where the net advance of (Y) and (Z) of P2 equals that of (W) of P2.”
In SPX in Foreign Currencies is Telling (10/30/09), I discussed two EW-based targets according to two internal counts of SPX priced in FX baskets. The less bullish target was invalidated by the subsequent continuing rally.
The more bullish target is now +4.22% above the current levels of SPX priced in FX (or SPX*FX). Reaching this target in SPX*FX can be accomplished by a decline of 4.22% in the USD index, or a rise in SPX or more likely, a combination of both.
The historic date which corresponds to this SPX*FX target is 9/8/08 - a fatal week that marked the beginning of the failure of several major financial institutions and the acceleration of the financial crisis (see the TimeLine). It should be noted that on that day SPX has a high of 1274.42, a low of 1247.12, and a close of 1267.79. Chart 1 below was published on 11/1/09 and Chart 2 below offers an update of the subsequent price actions.
shown on 11/1/09 --------------------------------------- current update
This can probably be the final advance of the bear market rally.
 In terms of the level of complacency, it is only surpassed by that during the credit mania climax.
In the previous MTU weekend edition (4/1/10), I mentioned that if VIX reflects the general sentiment towards risk, the current level of complacency is only surpassed by that during the final phase of the credit mania. Historically, VIX has only been lower than its current levels (a low of 16.06) when SP500 is around its current levels (a high of 1194.66) during the 2002-2007 credit mania climax. (Chart 3, updated).
This Friday, the VIX closed at the LOWEST level since the October 2007 stock market peak. The intraday low on Friday was 16.06, leaving the 15.82 low on 5/19/08 as the only lower intraday reading on VIX between then and now.
 Even the most strategic bears have been hedging their views in recent weeks with one more down-up sequence. That is, the February low is now labeled as an (X) wave by many, including yours truly, with one more A-B-C to come. It may be time for the contrarians to be more contrarian.
 Instead, a zigzag-(X)-zigzag-(X)-flat structure may very well be a good description of P2.
One appealing feature of this count is that it is able to describe the wave structures of both SPX and RUT, two diverse and seemingly out of sync indices. The second (X) of the SPX counts as a running flat (with B=1.35A) whereas the second (X) of the RUT a regular flat. See Chart 4 and Chart 5.
While this is may or may not be the right count, but the possibility/probability is there. If this is the case, the rebound since 2/5/10 is wave C of (Z), and the final wave. Those who can discern a completed five from the squiggles will have an edge.
Less than 5% upside for FTSE100 ?
The FTSE100 and SP500 have been highly correlated and have very similar wave structures. Fortunately, details of the wave structure are more obvious in FTSE100 at times. Key observations are that
 Both the corrective structure count and the impulsive structure count of FTSE100 point to a high likelihood of less than 5% of upside potential. The upside potential ranges from 0.6% to 4.47% depending on the count and the particular fib relationship. See Chart 6.
 The most generous/bullish count of the advance since the early February low places FTSE100 at nearing the end of [iii] of C (or 3 of (5) in the case of the impulse). See Chart 7.
It’s not unreasonable to map this count of the U.K. market into that of the U.S. market. It should be noted that the structure of SP500 appears a lot more corrective than impulsive since March 2009.
Footnote ... unless one accepts EWI’s proposition of a skewed triangle from 8/7/09 to 10/2/09 – but what do we make of the same structure in the FTSE100 then?
The appendix shows a number of squiggle counts highlighting the potential structure of wave [v] of C. A couple of them indicate that (v) of [v] is already in progress. One count places the market at (iii) of [v] of C.
Nearing a potential end of a run with an expanding EDT
... with an post triangle thrust (red labels) Or extending up and away! (blue labels)
Alt - Nearing the end of wave (x) of B of (Z), (y)-down of B to follow