Question is...how far can the rally go? After analysing the charts on SPY, I found two possible scenarios:
1. S&P 500 rallies to either 128 or 134.5
2. S&P 500 descends to either 115.6
Based on the Elliotte Wave theory, we are currently in the 5th wave. Due to government intervention, I think the bottom of the 5th wave has been delayed. I doubt that 5th wave has hit the bottom because companies are reporting their earnings in October, this will be the real test especially for sectors like technology, commodities and financials. SPY will likely hit 128 or below 134.5 before it continue the journey to find the bottom.
If I am incorrect, then we could be witnessing the start of wave "a", which makes 134.5 or above as the likely target for SPY.
In the short term, I think we should keep an eye on the Euro. As the dollar strengthens, this gives us an opportunity to be bullish on sectors affected by high commodity prices and short commodities. I expect commodities to regain strength if the dollar weakens if many key companies report bad earnings in October.
Updates:
9.53am The market chooses to go down, lets see if the 115.6 level acts as support.
2.24pm Market broke 115 support, unbelievable! Still we are not at the bottom yet. Sigh....earnings and what next...?
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