Targets of yesterday’s trade setup was met in a rally fueled by FED release on unchanged interest rates.

In our previous analysis we were uncertain whether was this post-February rally an impulsive wave or a corrective A-B-C. However, given that wave 4 in the chart below did not invade wave 1 space, and a higher high was established, it is certain that this rally is of an impulsive form.

We are in the 5th wave of the major wave 3.

Under this scenario, we should expect the channel to be respected and the blue 3 to end in the 2080-2087 level, on 1.68 extension of blue 1 with blue 2. That said, wave 4 should retrace as much as it wants but not invade the top of blue 1 (1931). An expected retracement of 4 should be 38% Fibonacci, around 1990-1980 level.

Right now we are trading in the 5th wave of 3rd, which depending on how fast will move, may reach 2074- 2080 levels.

S&P 17-03-2016 atl 1

Unless the channel is broken on the downside, we only advise long positions with stops below the trendline. Also, profit targets should not be very ambitious given the resistance of the upper trendline. We should be experiencing a reversal around 2040-2044 levels to retest the lower trendline if we want to reach the higher target in the following days.

For swing traders, enter long in these levels with stop loss below 2000.00 and targets 2050.00, 2060.00 and 2070.00 respectively. Use trailing stops once you are in the money.

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