Elliott Wave Trader: S&P Holding at Wave 3… Seasonal Drift Higher

The past two months have offered one of the strongest short-term rallies in market history. Stocks soared in November, reversing October’s big selloff and oversold levels. In December, the rally continued, at least at a slower pace.

From a technical standpoint, markets are potentially just partway through the middle of an Elliott Wave pattern. If so, a short-term pullback could be in play in the coming weeks.

Such a pullback would allow stocks to get off of their overbought technical indicators. An attempted drop lower the week before Christmas wasn’t enough to trigger a such a pullback.

Following such a drop, the Wave 4 of the Elliott Wave would be completed. That would set markets up for a final big move higher in Wave 5.

Given the current prices of stocks, that would mean the markets hitting a new all-time high in the months ahead. Historically, January is a strong month for the stock market, particularly in an election year.

Investors following Elliott Wave theory would want to target such a pullback to buy stocks ready to trend higher.

For a big move higher, tech stocks would likely offer the biggest percentage rally move in the short-term.

Following such a jump, markets may consolidate, or start a new trend lower. Investors will want to look for indications either way to prepare for the next big move following a Wave 5.

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