As the market completed a rally into the end of July, our expectation was that we would see a pullback into August. And, even though the market made a higher b-wave over a week ago (yes, it actually was a b-wave), we finally saw more of the downside structure which we were expecting over this past week.
Moreover, this pullback has now set us up to break out to new all-time highs, despite all the noise we heard about Turkey or trade wars.
On Friday afternoon, the market pushed higher to just about complete a 5-wave structure off the lows struck earlier that week. This suggests that we now have to be ready for a break out in the market to new all-time highs. The ideal and most bullish structure I am now tracking suggests that we are completing wave (1) of wave iii of (iii), as presented in blue on the attached 60-minute chart. Should we see the ideal structure continue, it would suggest we see another corrective pullback in the coming week that does not break back below 2806SPX, which I have labeled as wave (2). Once that completes, the next rally over the top of wave (1) will trigger a move to new all-time market highs. The question then becomes if we will strike our top at 3011 or 3225SPX?
Normally, when the heart of a 3rd wave takes hold, it moves us from one uptrend channel into a higher accelerated channel, which I have now drawn for the blue count. That means that if we complete this (1)(2) in blue, and then begin the 3rd wave higher, and break out through the lower trend channel by the end of this month, it would suggest to me the pattern taking us to 3200+ is likely in play. Otherwise, if we are unable to break out through that trend channel by early September it suggests that the ending diagonal is playing out, and it becomes much less likely that we can break out through 3011 before this wave (5) of v of 3 off the 2009 low tops out.
And, to reiterate our larger degree expectations, we are still looking for a rally up to the 3000 region, but, more ideally, up towards the 3225SPX region in order to complete wave (5) of v of 3 off the 2009 lows. Once we complete this rally, we will be looking for a 20-30% correction beginning in 2019. Nothing has changed those expectations as the market continues to chug long to our long-term targets.
