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(10/17/15)
The S&P 500 has rallied back to its 61.8% Retrace of 2033
calculated from the all time high of 2135 to the low made in late August at
1867. Overall the rally from the 1857 low still has the potential to
be an "ABC" Zig Zag move as "C" is near
completion. If this is an "ABC" move then another pullback
should occur soon.
However we also can't completely rule out a more complex rally
is developing such as a "WXY" Double Zig Zag pattern. In this
scenario the first Zig Zag "W" is nearing completion which would be
followed by a pullback for "X". This would then be followed by
another upward move for "Y" to complete the pattern with a target near
the 78.6% Retrace of 2077 by the end of the year.
Finally one thing that is a bit concerning is how quickly
investor complacency has returned as the VIX has dropped from the lower 50s to
the 15 level in just 8 weeks. I know many investors think the market is
going to act like the period from late 2011 into early 2012 where the
S&P 500 rallied to new highs after a 22% correction.
However keep in mind after the S&P 500 bottomed in early
October of 2011 (point E) it took 22 weeks before the VIX reached the 15
level. Thus time around the VIX has fallen from the lower 50's to 15 in
just 8 weeks. With the S&P 500 still 100 points below its all time
high and the VIX already at the 15 level it's hard to envision the S&P 500
rallying to a new high.
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Amateur Investors
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