Elliott Wave Options: Earnings Reports Lift Markets… S&P Wave 4?
There are many ways to look at markets and market trends. Elliott Waves are a technical strategy that identify a five-wave move that mark market trends. The latest market strength of the past few days thanks to earnings season could be a sign of a Wave 4.
If so, the current upside may have a few more days to play out. But it could also lead to a Wave 5. That’s a downside trend that would result in lower lows.
Earnings season has been beating expectations so far. Companies may have slowed in some respects. But unexpected growth points or better-than-expected results have resulted in some strong performance for reporting stocks.
That could result in stocks bouncing from their 200-day moving average to their 200-day moving average.
But if that play doesn’t follow through with a further rally, the downtrend in place should lead to further declines in stocks. For the S&P 500, that means a run to 3,800. A move higher could break the bear market.
Meanwhile, rising interest rates in the bond market could reverse slightly in the coming days. However, with the prospect of further interest rates hikes, bond yields may also spike higher. As that happens, bond prices will continue lower.
Overall, markets are playing out an oversold bounce. Conditions are ripe for a retest of the lows, with a strong chance of breaking lower.