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ANALYSIS: S&P 500 started "The rally of the last leg up".
In the weekly chart below the S&P 500 completed wave 5.4 (out of 5 waves) and just started wave 5.5, which is the very last 5th wave up within the 5th wave of major grade. In few words: it's fifth of the fifth.
The 161.8% target calculated upon the range of wave 5.1 should take the index in the vicinity of 1,420, generating a double top as the last one topped at 1,418.
Only in the remote case of the Federal Reserve implementing a substantial QE3 there would be an extension of the wave 5.5 that would push the index to level 1,643. But this seems to be quite unlikely at this stage.
This is comfirmed by the daily chart below: see waves 5.5.1 and 5.5.2. Wave 5.5.3 in blue was able to breakout the channel and should be able to reach a minimum target of 1,387.
The 4hour chart below confirms this hypothesis: wave 4 touched the magenta channel. it's supposed bounce back and generate a rally to form wave 5. This would actually complete wave 5.5.3 of the daily chart (above)
Finally, see the 1hour chart below with wave 4 performing a 3-X-3 and touching the lower boundary of the channel. Unless a last minute surprise, it's supposed to rally from now on.
Note: the volatility around wave X was caused by Ben Bernanke announcing another round of "Operation Twist" by $267 billion. The market mistakenly thought that the FED was injecting more liquidity.
Instead, it will sell that amount of short-term securities to buy longer-term ones to keep long-term borrowing costs down. The program, which was due to expire this month, will now run through the end of the year.
That announcements caused a roller coaster of the market for about 3 hours.