SP500 has continued its push to the black point number 5 in our Hope Rally model (Chart 1). It was up 1.94% last week and is now less than 8% below its all time high.With the exception of transports, most benchmark indexes have now made new recovery highs, confirming the prior breakout in SP500, Wilshire 5000 and Nasdaq indexes.
The key questions raised in Break Out (9/7/12) remain operative:
(1) Where (and when) is the proposed wave 5 likely to end?
(2) Would the associated black point number 5 complete the Hope Rally or are there point-6-down and point-7-up to follow?
We continue to see early October (+/-) as a potential timing of the black point number 5 and the pending high unlikely to surpass the all time high.
In addition to the observations in Break Out (9/7/12), we offer the following observations.
[1] The minimum requirement for a high has been met, especially in the wave structure of the Dow. Chart 2 shows that the Dow may be forming a potential ending diagonal triangle since its June low, complete with an overthrough. Chart 3 shows a potential five wave advance since the June low in SP500 is also nearly complete.
[2] From a time perspective, October represents the time equality between 2007high-2012high and 2002low-2007high (Chart 4, vertical lines).
[3] SP500's advance/decline profile still does not confirm the breakout in SP500 (Chart 5), similar to the non-confirmation between transports and the Dow. Negative divergence continues to exist.
