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The S&P 500undefined stock market index marginally took out the 2125 resistance level Monday, but, due to the gap, it has not given us a "wave structure" upon which we can make any reasonable determinations just yet. 

Normally, when we see a large gap in the S&P 500, we will go to the S&P 500 futures to fill in the structure of what occurred in the gap. But, when the Emini S&P 500 futures also gap 30 points, it leaves us questioning what the structure is within that gap. 

Due to the lack of wave structure off the lows, we have to resolve any question by patience and resistance. If the market has truly bottomed already, it has begun a rally in exactly the manner in which the completion of an ending diagonal should. We can certainly consider this reaction as the "violent" type of move in the opposite direction we see at the conclusion of an ending diagonal. But, without the structure off the lows, there are too many questions.

So, we are going to be a bit more patient and look toward our lower resistance region. For now, the heart of the resistance seems to be the 2135-2140 area. I would want to see the market continue this move through that region as it heads toward 2180 to complete wave 1 of (iii) off the lows, based on Elliott Wave analysis. And, remember, if one goes to the sidelines here, the market will "likely" come back to the 2140-2160 region in a wave-2 pullback once wave 1 has completed. Often, when we break through resistance, the market comes back and tests that broken resistance from above before it continues in its larger degree move higher, and that is what we are expecting right now. It would also set up a very nice inverted heads- and-shoulders pattern to match that 1-2 structure.

At the same time, we should note that the iShares Russell 2000 (IWM) - Get Free Report suggests that the potential for a lower low is not immaterial. We know that seeing a move like this can certainly suggest that the low is in place, but we are just going to be a bit more cautious until wave 1 has completed.  Remember, sometimes these diagonals -- just like triangles -- can continue longer than we normally expect.

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And, isn't it quite typical of the market to have a major catalyst occurring this week to help us along in our resolution of the count? So, after such a large move off the lows, it may now be time to move to the sidelines and let the market resolve itself in this region. It is not likely that the S&P 500 is heading to 2350 by a single gap up overnight. We will have other opportunities to get on the train, so we are going to be a bit more patient right here. Lastly, anyone who is using options to trade this move should wait until after the election due to the elevated cost of volatility in the options pricing.

See chart illustrating the wave count on the S&P 500.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.