BULLS HAVE DONE A GREAT JOB. THEY HAVE BROUGHT ABOUT THE BOAT WHEN THEY SAW THE STORM APPROACHING
Last Wednesday I entitled the post with two antagonists forces: Breadth (Favouring the resumption of the Intermediate up trend) vs EW structure of the advance (Supporting a larger corrective pattern).
All things being equal, it is unquestionable that the Summation Index bullish signal cross could allow a multi-month up leg if it follows the script of "from oversold to overbought"
Regarding the EW count, I maintain reasonable doubts regarding the character of the advance. As a matter of fact I am inclined to label the move as a corrective Double Zig Zag (Blue count) instead of an impulsive one. (Red count in which case price should be in the wave 3 of an impulsive sequence)
The difference between the two EW count is enormous since the former should result in a larger corrective pattern while the latter would give credit to a potential multi-month up leg.
As it is always the case when there is ambiguity in a certain EW count we will have to wait for the following pullback (which is due) since the its internal structure and size will give us clues regarding the overall pattern.
So far Bulls have strengthened the bullish case, hence now the Bears have to prove that the advance from the June 24 low is a counter trend move. The first step if to close yesterday's gap up at 1652.62, afterwards the rising trend line has to be breached.
Obviously the current surge has pushed US equity indices into overbought territory therefore if not today, for next Monday odds favour the beginning of a multi-day pullback.
Lastly in the daily chart I have labelled the two potential counts, undoubtedly, in spite of the reasonable doubts, bulls have regained the upper hand. Without closing the gap at 1652.62 the expected pullback will most likely be the wave (4) of the bullish option. In order to regain confidence on the larger corrective option bears will have to reclaim the 50 dma, an achievement that at the moment does not seems probable without a catalyst.
Enjoy the weekend.
