Crowd psychology says this ‘fool’s rally’ in stocks could fool bears

From its May 1 high, the S&P 500 Index fell 153 points in two weeks, the biggest pullback since December.

Since Monday, however, the S&P 500 SPX, -0.58% has bounced as much as 91 points. The obvious question is this: Will the “fool’s rally” relapse, or will it fool stock-market bears and continue higher?

The yellow projection, below (the price is updated, but the chart was originally published in the May 13 Profit Radar Report), reflects my best guess. The yellow path is based on Elliott Wave theory and the assumption is that a five-wave decline ended at Monday’s low.

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