The S&P 500 closes higher than it started this week. The wavy rally hit a new record high. The following analysis is based on the Elliott wave theory.
November 15, 2019 | AtoZ Markets – The Wallstreet’s main stock indexes are closing the week higher. However, there was less activity this week compared to last week. Traders are being cautious of another upset arising from the US-China trade conflict. President Trump’s speech in the mid-week created a sort of confusion for the market. While he agreed that the first phase of the trade agreement with China is close, his tone was not friendly and encouraging. This casts a shadow on the stock market as investors become worried of another breakdown in talks.
Nevertheless, the stock market was upbeat this week. The three main indexes all hit new record highs. S&P 500 hit $3,100 after gaining about 0.8% this week to increase November gains to 2.1%. However, at the time of writing, the price has dropped to $3,103.
Technically, the S&P 500 has hit a strong resistance level around the $3,100 psychological level. The price is responding with a tiny dip as investors book in profit before the market closes. In addition, a wedge reversal pattern has completed around this resistance zone. The price should respond with a fast decline to 3070 before the 3,000 psychological level. On the other hand, if a deal is finally struck, we should see stock indexes make fresh record highs.
S&P 500 closes higher: Elliott wave analysis
From the Elliott wave perspective, we reckoned that the price is completing the 5th wave of the impulse wave from 685.9 (March 2009 low). The 5th sub-wave of the 5th wave of this impulse wave is completing an ending diagonal pattern. However, the diagonal is currently at the 3rd wave. Apparently, the S&P 500 could go as high as 3,200. From the lower time frame, the 3rd wave of the diagonal is completing its last leg – an impulse wave. In the last update, we used the chart below to show the emerging impulse wave (All charts used are from TradingView).
From 2855, the price advances in impulse wave to the strong resistance zone around 3100. Wave v was emerging into an ending diagonal pattern.
The chart above shows that the impulse wave has completed with an ending diagonal 5th. We will now have to see whether the market will respond with a fast decline. Ending diagonals/wedge patterns are often followed by quick counter-moves. Before considering this as valid, we should first see the price fall to 3090.