S&P 500: Is Rally to 4800 Already Underway?

As we look back upon another interesting week in the market, there are a few standout matters I would like to point out.

But, you will not be able to identify these types of movements based on traditional economics. As Benoit Mandelbrot outright stated, one cannot reasonably apply an economic model to the financial markets: “Moreover, should we see that downside follow through in the set up I am outlining, then it will likely be blamed upon a reaction to the Fed this coming week.

“Yo yo, check out the markets today. The jobs news implies strong economy and inflation, disaster for the Fed, so yields have spiked, 10 year is up 1.3%.So: think about it. Which better explains today's actions: breaking news? or technical and sentiment analysis?” "Just stay on your toes, as once this downside completes, we should see a very strong reversal which can take us back towards the ellipse overhead.”The ellipse referred to in the quote above was pointing to a strong rally back to the 4316-4342SPX region as our expectation once a low was struck. And, if you look at the action seen on Friday, we indeed saw a very strong reversal which topped on the same day at 4324SPX, right in the middle of the ellipse outlined on our chart.

Although it is a lower probability at this time, if the market breaks down below 4165SPX, it opens the door in a big way to the market setting up for a crash into 2024 which would point us down to the October 2022 low, and potentially well below it. But, it would still likely provide us with a multi-week “bounce” before we see a major breakdown below 4000SPX.

This is no different than if an army general were to draw up his primary battle plans, and, at the same time, also draw up a contingency plan in the event that his initial battle plans do not work in his favor. It is simply the manner in which the general prepares for battle. So, why should we not do the same when we approach the market?

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