I present 2 charts: A bear case and a bull case.
I can honestly say the evidence of a wave 4(5) now looks rather weak. Have I bailed on it 100%? In my heart, I bailed on it last week when I was doubt due to the breadth and volume of the rally. But for wave-sake, 780 would be the maximum for 4(5) I would think. (Of course you would have to ignore the NASDAQ - it broke 1456). If 780 resistance is broken to the upside, your looking at a run to 796, probably a touch into 800. This would fulfill the inverted H&S pattern I have shown a couple of times lately. That is the spot a nice pullback would likely occur.
If wave 4(5) is to have a chance of surviving (and hence 5(5) to new lows), it would have to start immediately tomorrow pretty much. Today finished on the high. From afar, it looks like a 5 wave move up so far from 749 to today's peak, but it ended rather bullishly so..... The inverted head and shoulder neckline was never really tested by the SPX. So I respect that upside target of 800-804 if 780 breaks to the upside.
The bearish side of the case has a few things going potentially:
1. The VIX is still holding above 40. (In danger of tracing a 5 wave move down - bearish)
2. The banking index is holding below 27.95.
3. There is a "legitimate" (I don't like it though) wave count for 4(5) to peak
4. OPEX week, Wednesdays are usually the brutal days.
5. 780 is tough resistance.
6. The friggin market is due for more than a 24% correction.
7. Negative divergences showing up on the 30,60 minute charts big time now that a new peak has taken hold.
1. Breadth and volume is very good.
2. Key support areas have held solidly. 742 then 750.
3. Broken above the upper channel lines.
4. Wave structure looks more bullish and solid than a failed bear rally wave we have been so used to seeing.
5. NASDAQ has violated all known wave 1(5) possible lows - RED FLAG situation for the bears.
6. Its Springtime - the long winter is over and mood is probably shifting somewhat.
Here is my thinking (out loud): The inverted H&S has an upside target of 805 max. 796-804 is a WALL OF RESISTANCE that will not likely be cracked on this initial move up.
So the first MAJOR pullback of more than a 24% correction may in fact occur after a touch of 800. That would fulfill the IH&S pattern. Then late this week or early next week the bears would absolutely SHRED the rally back down to some critical support area, perhaps even 742 or maybe a tad lower. Then that area reverses and holds and Primary Wave 2 continues into the Springtime.
But beware, I am just thinking out loud here. Tomorrow will be a key day.