Dr_Roboto
Long

S&P 500 Did we just end corrective wave or is this false rally?

OANDA:SPX500USD   S&P 500 Index
Food for thought. Is the corrective wave over and we are moving on to the next major motive wave 2?

The thing that I find interesting, is the current rally from the low yesterday looks to be in 5 waves. My understanding is that up trends only happen in 5's when we are in a motive wave and not a corrective (5 up and 3 down). Corrective waves have up trends in 3 waves and down trends in 5 waves.

I checked against the rally after the "trade war" drop and we just passed its corrective wave time frame (0.25*motive wave length).

The clear breaking of the down trading channel is also normal sign of trend change. It is highly possible that the corrective wave has completed and we are in the first minor motive wave for the next major motive wave. Or, this is one major fake out. Technically, we did not make a higher high than the previous waves. It is very possible that we still have a lot of down left to go.

I just have a hard time believing we are in rally mode for next corrective wave given the massive surge in coronavirus cases. I guess that speaks to the power of the Feb pump.
Comment: FYI, by the end of the day we did make a noticeably higher high. The really long candles at the end of the day where impressive. Not sure if this was all a massive short squeeze with a big drop coming or this is the real deal.

Comments

@Dr_Roboto What are your thoughts on the possibility of us still being in Wave 2, after adjusting your chart for a longer Wave 1, and 2 looking to have more of a double peak setup... Idk, throwing it out there?... We'd still be looking for a major motive wave 3 down then
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Dr_Roboto farmerisland
@farmerisland, to be honest I can't figure this one out. The 5 wave corrective impule down the wave C was so clear and in other people's charts. That seemed to be such a strong 5 wave up, but counting waves is really hard during corrections. There are so many varieties and combinations that can be misleading. You could be right and this was some kind of odd impulse in the corrective wave that caused it to be distorted. Some form of short squeeze at the end of the month could be the cause.

We will know if it is a motive wave because there will be a small corrective wave (#2) over the next day or so to test support. Then the next motive wave #3 should be strong and clearly break the resistance setup by the wave #1 peak.

The one thing to watch out for is that large time scale corrective wave only have 3 waves. That means if this is still correcitve the wave (some for of B wave) then it will stop at 1.618 and not complete to 2.0 extension. There are many examples of the S&P 500 doing this 3 wave up to 1.618 extension. That 1.618 wave is typically followed by a rapid drop wave C.

The only thing I do know is that this is the time for me to just wait for things to shake out. I am too much of a bear and too conservative with my trades to play this hand. I am more than happy to wait until the trend is clear. I burned myself today being too arrogant and aggressive.

Good luck.
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We all wondering the same. I'm short, ought to backtest the breakout point from wedge IMO
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@Dr_Roboto I think by week's end we're going to have a very clear answer to your questioning...

I hope you can find the SPX500USD easier to track data and complete trend/wave analysis. You have great thoughts.
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Dr_Roboto farmerisland
@farmerisland, the extra data with the SPX500USD is so much better. I wish I would have known this months ago.

At this point, I am done trading until things clear up more. The Fed pump is amazing what it can do. I still question how long they can keep it up. Seems like a house of cards that will have to fall some time (months, weeks, years).
+2 Reply
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