SP500 came within 2 index points of making a new record high on Friday and SP500 futures delivered a new all-time high in the pre-market hours. However, momentum and price structures reveal potential underlying weakness. Consider the following potential bull/bear-trap scenarios. See Chart 1.
Here, we track the advance since the October 2014 low (1820.66) as a double three, (a)(b)(c) as [a]-up, followed by [b]-down, then (a)(b)(c) as [c]-up.
[Blue – bull trap] The final wave (c) of [c]-up is in progress. It is an ending diagonal triangle. Expect a short-lived new high, followed by a meaning full sell-off towards the October 2014 low.
[Red – bear trap] The final wave (b)-down of [c]-up in progress, tracing out an expanding triangle or a combination. A minor new high is not required but could briefly surface. Expect a pullback toward the 2067.93 pivot before wave (c) of [c]-up pushes the market to a new high. Under this scenario, we are likely to see a bearish May/June and a bullish June/July.
The green and gray counts in Chart 1 tracks an impulse wave advance off the October 2014 low. Wave 1-up likely ended at the early December 2014 high. Wave 2-down has been quite complex in its structure, with various potential ending points, as highlighted in Chart 1.
Chart 2 offers the big picture.
