While the perma-bulls are soiling their pants in excitement over this rally, I remain unimpressed.
Here is my updated Weekly SPX chart:
Annotated on this chart is the 943.85 price high of January 5, 2009. The move down from 943.85 to 804.30 on January 19th counts as Wave 1 DOWN of a larger Wave 5 DOWN from the highs of October, 2007 (see blue circle 5 upper left of chart). This is not the only wave count, nor is it necessarily the right one, it's just the one that makes the most sense to me.
The last bar on this chart is for the current week and it is retracing a percentage of the entire January decline. Under orthodox Elliott Rules, this Wave 2-Up can retrace up to 100% (and no more) of Wave 1. That is the significance of the 943.85 level. If it gets taken out to the upside, this Wave Count is wrong.
Levels discussed by other readers representing 38-50-61% levels of Wave 1 are all premises of the extent of this Wave 2-Up and are worth keeping sight of in the next few days. The high print today was 877.86, a near-perfect 50% retracement of Wave 1 DOWN.
We know that upon completion of Wave 2-Up, that the next move is a Wave 3 DOWN and it promises to be hard and sharply DOWN, as all Wave 3 DOWNS are usually the worst, most fearful of all waves under the Elliott Wave Principle. That it may be occurring on a Weekly Count will serve to make it all the more severe.
The bullishness of the media, especially Cramer today on CNBC, is all typical psychology for Wave 2. As Prechter describes the psychology of Wave 2's, "At this point, investors are thoroughly convinced that the [bull] market is back to stay." (Page 80, The Elliott Wave Principle, Frost & Prechter, 1978)
So there you have it, possible 70 more points to the upside for the SPX, against the expectation for a violent decline that could start at any time targeting a loss of 200 or more quick and dirty points on the downside.