The S&P 500 continued its bullish trajectory, climbing over 30% from its October 2022 lows. However, according to Elliott Wave theory, this rally appears to be part of a corrective A-B-C pattern rather than the start of a new long-term uptrend. The current rise is being labeled as wave C, indicating that upside potential may be limited. Technically, this wave lacks the strong impulse characteristics usually found in early bull markets, suggesting caution for investors expecting sustained gains.
Additionally, several technical signals are flashing warnings. Momentum indicators such as the MACD and RSI show bearish divergences, as prices reached new highs without similar peaks in momentum. This divergence often points to waning strength behind the rally. If the Elliott Wave count is correct, a significant reversal could soon develop, potentially sending the S&P 500 into a deeper correction phase. Traders and investors are advised to remain vigilant and manage risk accordingly.
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