Futures are indicating that SPX is going to gap through resistance at the open, which is probably not exactly what bears want to see. It will of course remain to be seen if SPX can sustain that breakthrough, but as we did for much of this rally, we'll refrain from bearish front-running unless we see an impulsive decline or a solid inflection point.
I want to pause here and note that it is incredibly unusual to see a decline of the depth and strength as we had earlier in the year that is NOT followed by a second leg down. I won't say it's "completely unheard of," but it's very, very uncommon. As a result, it would be disingenuous if I didn't admit that I'm a bit surprised that the market has managed to (thus far, anyway) avoid any additional fallout.
But avoid additional fallout it has, so we simply have to put bearish thoughts on the back burner until we see something suggesting otherwise. A B-wave rally is still possible here (with the second leg c-wave down still due), and unless we see this breakout increase in upward momentum, that will be a prime suspect. However, if the breakout runs on increasing momentum, b-wave odds will likewise decrease.
I've listed some targets for the most bullish options on the updated chart below:
In conclusion, again, it's quite unusual to see a free-standing decline of the magnitude we saw in January/February without a second leg down, so bulls aren't out of the woods entirely just yet, but by the same token, bears probably want to await some confirmation before acting aggressively (yes, we're back to the same mantra I repeated most of the way up). Trade safe.
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