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For months we have known about our 1556 target for the S&P and, despite the mounting bearishness of the past month, the fear of a double top at the 2000 highs, and the appearance of cycles which were supposed to prevent a record-breaking run, our target has officially been reached!!! But, as if all that wasn’t enough, the market obliged us further by reversing off our target making our end of day short trade profitable with a surge downward through the bell and into 4:15. This was nice, icing on the cake. The real story for today is how we got here. The last several updates had expressed my skepticism in the move off the early July lows. For the most part we’d been using our unbiased framework to put together trades and make money on both the ups and downs of a range-bound market. The big picture coming into the week was that we were either seeing a failed rally that signaled a market top was in, or that the drop was deceptive and would put in a bottom from which new highs could be reached. Last week’s update flat out said, “I feel that we are at a point where we can get that blowoff/capitulation move, or buck the trend like we’ve been doing all along and finally this time take seriously the possibility of an important turn while most others stay bullish.” As we know now, Thursday’s rally was built on the back of the bears and casual buyers of “portfolio protection” who forced to cover and illustrate why profit is our preferred brand of protection. When Tuesday’s opening gapped down, the two possibilities in the chart below became operative. 
I think that the w2 of the larger diagonal gets all the respect it deserves here. Of course I would be watching for any failure of that with an immediate plan if I saw it. Even if we have to switch ideas 15 points lower, it means nothing as we have been trading up into these highs and down from them as others worry about the "count." I am looking to see a 2nd wave of a larger diagonal find support here or a bit lower. Anything else is bearish but I'm not concerned of that yet. The selling action on Tuesday and Wednesday fit very nicely with our expectations, but also proved the limitations of basing your trades on a weekly update. While weekend readers may have been selling Wednesday’s open, or buying puts, members were urged to buy and get long what looked to be the start of a w3 of 3 up. The late day rally vindicated this outlook, but rather than fade the rally, the following 2 charts was posted as a roadmap: 
Once the market opened with a gap up, the path was clear to at least 1540. Those who bought the opening on Wednesday were exposed to over 30 points in 48 hours. Shorts at that point were tempting, but weren’t working as we had a market that did not look like it wanted to quit until it reached our 1556 target. Of course now that the target has been reached, we’re only now getting to the sweet spot! The bottom line is that we just bought the low of a 50 point three-day rally and watched it already reverse slightly off its target on Friday. And, as usual, we feel we know where this market is going from here and when it’s going to get there. 
Have a profitable and safe week trading, and remember: “Unbiased Elliott Wave works!” Dominick
Market
analysts are always welcome to contribute to the Forum or newsletter. Ideas from this update are provided as general information and are not investment recommendations. TTC accepts no liability whatsoever for any losses resulting from action you may take based on the contents of its charts, commentaries, or price data. Each person must do his or her own research to determine the appropriateness of taking a position in any financial or commodity market. If you are uncertain, please check with your licensed financial advisor or broker prior to taking any action. Securities and commodities markets inherently involve risk. CONTACT
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