Wednesday, March 23, 2022

SPX Update: Next Target Captured

Last update opined that the market should continue to trend higher, with SPX probably headed toward the next target/inflection zone of 4485-4505, and that zone was captured and exceeded yesterday.  

Bears trying to understand this rally from a rational perspective might want to consider that we're currently in corporate tax season, and the Treasury typically uses the windfall to pay down T-bills.  Further, they don't need to hold massive Treasury auctions, which means there's more money available for Primary Dealers to pump into stocks.  That may change in the immediate upcoming weeks (which could provide our larger fourth wave; see second chart), but then there's another windfall near the middle of April (which could provide the fifth wave), when individual tax receipts pour in. 

Additionally, even if the market has turned into a bear, it's pretty common for bulls to get a general retest of the previous all-time-high before the next decline gets rolling for real.  This is hardly uncharted territory.

Further, the charts were hinting for weeks that a big C-wave rally was a distinct possibility.  As to where we are in that rally (assuming that's what this is -- and it's behaving like it is, so far):

I backed out a bit on the chart to help illustrate this in more detail below:

In conclusion, there are a couple of oddball patterns that could derail the "big C wave," but unless we see more evidence for those patterns, we'll presume SPX is at least headed for 3/c on the chart above (which will be a more significant inflection), with a reasonable shot at the larger blue 5 and C (preliminary target for that pattern remains 4717+/-).  Trade safe.

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