The stock market is offering no reprise for bears as we've now seen six positive closes in seven sessions, and the sole down day was just barely. The S&P 500 has now posted new rally highs on a closing basis. So where do we stand now? Well, we're looking at a potentially massive sideways consolidation over May/June which could project the SPX substantially higher:
If this pattern acts as a consolidation, we are looking at 1025, minimum for the SPX (75-handles projection above the consolidation peak). However, if this pattern acts as a giant mid-point consolidation, SPX 1150 could be in the works. I don't expect the latter for several reasons, including the fact that volume over the last week has not been supportive of a larger-scale move. A final possibility is that the market just made marginal new highs to shake out remaining bear positions before moving sharply lower. This last scenario is supported by the massive SoS seen in the spyders yesterday.
In any case, the action in equities will ultimately be determined by the dollar, and I'm leaning strongly toward further dollar weakness:
The fact that the second leg down off the March peak was substantially larger than the first was our first big clue that the most recent bounce would only be corrective, thus setting up another bear wave. Indeed, the bounce has been quite timid, and I expect the dollar to begin moving impulsively lower any day. I am looking for the dollar index to test the 74 pivot on this move, and such action should send the SPX to 1025 and escort gold above the $1000 mark.
In Elliott Wave Theory, it is possible for fifth waves to abort at the third wave low. Such an abortion in the dollar's chart would be an equity bear's only hope of seeing a near-term reversal lower. Bottom line is we need to keep a close eye on the for confirmation of our outlook or warning signs that we may be wrong.