Wedges are back.
Regardless of the new recovery high, the scary correction that ensued from the last wedge in the S&P should caution even the most ardent bull. Simply, these are patterns to be aware of.
In Elliott wave parlance, they represent a market that has gone too far too fast. I refer to them as fatigue patterns.
Whatever they mean, they seem to mean business. They can also fail, just like any other pattern. But in that the current rally may have used up a lot of energy, a fatigue pattern makes sense.
What matters obviously is how it resolves.
A close above the trend line could suggest more upside. But a pattern that traces out the rough schematic shown here may involve a correction.
It will be the nature and depth of such a correction that may help project the future.
For now, 2001.01 is a key level. Friday I had thought it was 2015.86, but 01.01 has a better look to it.
Gold and Natural Gas have a better look, too, now that they've rallied in what may turn out to be impulse patterns. Even the euro seems to be joining in. Ditto the Aussie dollar.
Crude looks like it needs above 82.88 to get going. Unless that occurs soon, I would expect a bullish falling wedge to slightly lower levels. This seems to be suggested by the lack of crazed call buying in energy names -- I haven't seen much yet other than around the October 15th low in the S&P.
Back to the New York Composite, I am watching this most intently. Being such a broad index, for it not to have confirmed the Dow, Nas, and S&P with a new high, and with the potential wedge forming, this may be the largest canary in the coal mine right now.
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