As the US stock market entered November 2021 it appeared due for a correction lasting one to two weeks. What happen was a continuation of the manic rally that began on 10/13/21.
The daily S&P 500 (SPX) chart courtesy of Trading View illustrates the recent action.
The best SPX – Elliott wave count since the lows of early October was that wave “B” up of a Running Horizontal Triangle was under construction. This wave count is still valid but the proportion of the rally since 10/4/21 is now large relative to the prior decline, making the supposed Running Horizontal Triangle count a low probability.
The action since the 10/13/21 looks like a classic third wave with exceedingly small and brief corrections. What makes determining the correct Elliott wave count since 10/04/21 difficult are the two subsequent declines after the primary bottom of 10/4/21. The second decline that bottomed 10/13/21 is larger in price and time than the first decline that ended 10/06/21. This could be a bullish series of waves “one’s” and “two’s” – however the second wave “two” is usually smaller in price and time.
It’s possible the supposed Intermediate wave (4) ended on 10/06/21 and was truncated – it failed to go below the 10/04/21 bottom.
The maximum daily RSI reading for the entire bull move since March 2020 was 82% made on 09/02/20. The daily RSI reading on 11/05/21 was 76%. This bearish divergence implies longer-term weakening of the bullish momentum. However, note that near-term daily RSI on 11/05/21 was at the highest reading since late September 2021. In the next few weeks, its possible near-term daily bearish divergences could develop.
The 60- minute SPX chart illustrates short-term momentum.
During persistent moves divergences can frequently be eliminated. On 11/04/21 the hourly RSI exceeded a bearish divergence made on 10/26/21. On 11/05/21 hourly RSI exceeded the 11/04/21 reading. This is short-term bullish implying higher prices in the near future.
The daily NYSE new – 52-week highs ($NYHGH) chart courtesy of Stockcharts.com illustrates internal momentum.
On 11/05/21 $NYHGH exceeded the bearish divergence made in early September. Near-term this is bullish implying higher prices in the next few weeks.
On 11/03/21 traders were stopped out of a 50% short position initiated on the SPX open 11/01/21. The two stop levels were at 4640.00 and 4660.00 the total loss was 0.43%.
The 10/24/21 blog “Possible US Stock Market Top – December 2021” discussed how the SPX could make a major peak in December 2021. If the SPX can make a new all-time high in December 2021 it could reach a major Fibonacci price zone in the 4800 area. If this scenario plays out it could create a fascinating Fibonacci price/time relationship. Depending on market action this will be examined in more detail, late November or early December.
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