Probable Resistance...

The S&P 500 rallied into the weekend with a closing price of 1484.35. This left the index just below an area of probable resistance. We can discern this by using two separate principles from Elliott Wave Theory.

If this rally up from the low of March 14 represents nothing more than Wave B of a larger corrective formation, then we can expect that it will consist of a three-wave pattern up where the first and last rallies are either equal or proportional to one another. This suggests that the wave up from March 30 will be roughly equal in length to the wave from March 14 to March 23. Since this latter rally was 74.91 points in length, we can expect the current rally to travel roughly the same distance. A 74.91 point rally up from the low of 1412.54 on March 30 would leave the S&P 500 at 1487.45.

Another method to calculate probable resistance assumes that the entire length of a formation will be proportional to the initial wave of the formation. In this case, we might assume that the rally from March 14 to March 23 represents 62% of the entire rally. Given that the initial rally was 74.91 points, the completed wave would have a length of 121.21 points. A 121.21 point rally up from the low of 1363.98 on March 14 would leave the S&P 500 at 1485.19.

Here we have two methods of calculating probable resistance both pointing to the same general area. This suggests that the S&P 500 can expect some degree of resistance between 1485.19 and 1487.45. Given that this index ended the week at 1484.35, we might expect any upward movement in the broader stock market to encounter some difficulty.