Investors remain flummoxed this week… after all, just how much higher can the markets move before they putter out for good? From a market technician’s point of view, there are two market scenarios that could be forming right now – and each offers its own chance to profit this month.

I’ve been saying for a while now that in order to see a distinctive move higher for the market, we need to get a break above the S&P 500’s 1180 level – and here we are tagging 1180 following the Easter holiday. Right now is the moment of truth: Do we stall here? Or is it away we go to the 1226 level on the S&P 500. We’ll find out some time next week.

For now, here’s what you need to watch to take advantage of some upside potential.

We are looking for a lasting trend change, something that we can sink our teeth into. With regards to the indexes we need to see a decisive break of the uptrend. However in our 60-minute charts below we have support levels at the green lines to contend with first.

If we are going to top, we can see one of two scenarios to be on the lookout for from here over the next few weeks because we all know this market can’t do this all year.

Scenario 1: The top will come on a rally attempt after a tag of those green support levels as shown in the blue lines below.

In scenario 1 above the game plan for us is to buy stocks that have pulled back off of their highs or are in clearly defined uptrends pulling back to support levels or the 50-day moving average.

Currently on the longside? The over extended will get more over extended, and the ones that do trigger really don’t get much follow through these days as we’ve seen.

On the longside it’s really about sticking to our discipline of not chasing stocks. I’d much rather trade off of quality patterns.

Scenario 2: The second scenario puts Elliott Wave Theory into play. Typically there is a rule of thumb with waves that if wave 2 is traditional (and this one was) then wave 4 can be sideways. If this is the case then we have another move higher early next week, which would look the diagram in the chart below.

It means just more of the same we’ve seen the last week or so: the extended get even more extended. Keep in mind that it also means it’s potentially the final wave to end this whole bear market rally.

That’s where keeping a short side watch list comes into play. As always, I’ll be here to fill you in when the market decides which scenario it’s following in April.

Sincerely,
David Grandey
AllAboutTrends.net

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David Grandey

David Grandey is the founder of All About Trends, an email newsletter service revealing stocks in ideal set-ups offering potential significant short-term gains.  A successful canslim-based stock market investor for the past 10 years, he has worked for Meriwest Credit Union Silicon Valley Bank, helping to establish brand awareness and credibility through feature editorial coverage in leading national and local news media.

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