In the financial market where speculators are putting their money at risk, the cycle of fear and greed is constantly being repeated. It is this repetitive cycle of fear and greed that cause similar price patterns and price actions to repeat. Base on this premise, the SP500 daily chart appears to be telling us that a new all time high could be in the offing.
On this chart, a rising price channel (label A) has been drawn to encapsulate the last twelve month of price actions. Within this price channel, the recent price action (label C) is very similar to the previous price action (label B) that took place in February 2014. Observe how the price came down to the rising support trend line and reversed direction. Also notice the similarity on the 20 EMA (blue line) cross under the 50 SMA (green line) in both instances. If the reaction to the recent price action is to be similar to the reaction that took place in February 2014, then we would expect the 20 EMA to cross over the 50 SMA in a similar fashion. And in order for the 20 EMA to cross over the 50 SMA, the price will need to continue to rise.
On this chart, Fibonacci retracements have been added to the price swing from October 2013 to April 2014, and from April 2014 to the present. Notice the price reversed direction after it has retraced to Fib 50% retracement in February 2014 (label A) and continue to rise until it was near the Fib 127% extension (label B). Recent price action also retraced to Fib 50% retracement (label C) and then reversed direction. If the recent price action is to duplicate what has occurred between February 2014 and April 2014, then we would expect the price to rise to near the 2040 level where the Fib 127% extension is (label D). When the price has reached the 2040 level, it will also have reached the upper trend line of the rising channel, and this will provide a confluence for the 2040 level!
If the current price pattern is to duplicate the previous occurrence, then one would expect the SP500 to continue to rise until it has reached the Fib 127% extension near 2040, a new all time high. Let's be reminded this price movement projection is all predicated on the continuation of the existing price pattern. If some unforeseen events that dramatically alter the current price pattern, than the price reaction will need to be reassess.
