Stocks and Bonds (9/6/13) and This Gap is Different (8/23/13).)
In the process, a small upward gap from 1672.40 to 1674.32 in SP500 has opened up. Interestingly, that gap coincides with
(1) the 50-day moving average as of Friday’s close, as well as
(2) wave three of three (the third of the third) of a potential regular five-wave upswing from the late August orthodox low.
See Chart 1.
Odds appear to favor a regular five-wave upswing with an extended third wave. If so, a new high in SP500 is likely when the upswing completes. In fact, one can project a measured move to 1719 based on the mid-impulse gap.
A “premature” fill of this gap before complete subdivisions of the proposed impulse wave or before a new high in SP500 is likely bearish. In that case, the August low is either in jeopardy or a sideways correction since the August high continues.
We will discuss larger tracking counts in future weekly commentaries.