Awaiting Consolidation Ahead of Next Rally

As we noted in our report last weekend:  "The Smart Money Composite signal continues long but the micro1 component is on a sell. We continue to hold our long position. Looking at price action, there are few possibilities here.  If we can hold the 3540-25 area, we can target the 3580s and if that is taken out, another test of 3630 area will be on the cards. If we cannot hold the 3520s, then a test of 3480/70 becomes very likely. What happens there will determine if we are going to get another immediate test of all time highs or not...All our signals/systems stay long and we also stay long until that changes."

What actually happened is we held the 3540 area and proceeded to rally into the 3630s and above.

Looking ahead, options data look bullish more or less. Internals also are holding a bullish posture. Price action is short-term bullish, medium-term bullish and long-term bullish. Our Odds indicator went to cash/flat last week and we exited our long trades for a profit. Next we wait for Odds to either go to a sell signal or back to a buy signal in coming days. The Composite signal is still holding long as we continue to hold internal support for the market. But it can easily go to sell in the coming week because the triggers for the components are getting quite tight the higher we go.  Just a matter of time.

On price, I am expecting some weakness to set up over the next couple of weeks and then maybe we can get another push higher into the 3750 area. If we directly push higher, then an Odds sell setup becomes the higher possibility.  The more likely outlook I see is for some consolidation/shallow pullback to play out over the next few weeks, which then sets up a move higher into year end and the beginning of next year. With Odds flat right now, we wait patiently for the next primary trade to set up. 

With regard to pivots and zones, grey zone resistance is at 3653-68 and then near the 3700 area. Support is at 3623-13 and then at 3593-83.

For Monday, daily pivot is at 3631. Resistance R1 is at 3649 and R2 at 3661. Support S1 is at 3619 and S2 at 3601.

All the best to your trading week ahead.

Princely Mathew hosts The Smart Money premium service at ElliottWaveTrader.