This is the final in a series of 3 posts I have done on pattern targets and I have saved the best for last. The chart below is a 10 year look back at the SP500 (the proxy most use for the US stock market). From a target and pattern standpoint, it is a thing of beauty and one to behold since the 2009 bottom.
As it rose from the depths of its decline, making higher highs and higher lows, a series of 4 inverse head and shoulders patterns developed (labeled in red 1-4 within the price movement) along the way. From those patterns, targets were developed which I have identified and labeled by red, dotted horizontal lines. These patterns not only acted as a potential roadmap to the future confirming along the way which direction we were headed but also where we might stop along the way. These stopping points create significant support/resistance levels for future any declines.
As you are aware, the final target, #4 of 2132 has yet to be met. Since targets are only objectives if the market to continues higher but we got confirmation from another indicator in April (see RSI top pane) that at least one more high will be made. While 2132 is a ways away and may never be hit, one thing I am confident of and have said before is the market likes big, round numbers. SP500 = 2000 is a big, round number and we are only ~2% away. With quarter-end right around the corner and wall street bonuses paid on quarterly gains, I do expect to see a bullish close to this month and would not be surprised to see we close it out at or above 2000.
Whether or not we meet or exceed the final target #4 will only be known at some point in the future. Since it has been an extended period since we have had even a normal 10% pullback, the odds suggest we have one before the final target is hit or exceeded. My point being it most likely will not be a straight line there so patience is warranted.
To close out this discussion on pattern targets on an educational note, its compelling to note that prior targets act as magnets on any future pullbacks. So, if/when we do finally get our long, overdue correction I would expect price to be drawn to 1820 (an immediate level of support/resistance) and if that doesn’t hold, target #3, 1775.