S&P 500 5-Year Elliott Wave Review

S&P 500 Primary Elliott Wave Count

It’s time again for another medium term review as we are nearing a turning point. Here’s my Primary count taking stock of the sell down since end of 2007. The first portion of this chart is the sell down that lasted from Oct 2007 till Mar 2008. Clearly, this was a five wave impulsive move and is depicted in the charts. It was fast, furious and vigorous. It is also confirmed by volume and MACD. Based on these indicators, is very clear to me that this was an impulsive move down. I know that some other analyst are counting this as an a-b-c correction but to me it looks like a perfect 5 wave impulsive move. I am labelling this as Primary A.

The correction that came in following this sell down was a lot more slow and choppy with a lot of over laps. It has also been very difficult to count. This is typical of corrections. The volume is low on the way up which means that this move up is not confirmed by volume. I’m labelling this as Primary B. For the Primary count, the Primary B is in progress in a W-X-Y pattern with W-X done and Y still developing. The Y portion is further expanded in a Ending Diagonal of Minor A-B-C-D-E with A-B-C-D done and E in progress. E is further developing in a w-x-y or w-x-y-x-z pattern. The S&P 500 is current in the y wave.

The target for this y wave is 1375 and we are very close to that. With the completion of y, we can expect the market to turn down. A lot of people are awaiting for a crash after y is completed. It might drop in a flash crash but I believe that the Minor E is still has not run its course yet. After the correction following y, I expect the market to head higher into 1500 region. The reason for this is simple, there is simply too much bearishness in the market right now and there is simply too much anticipation of a crash. I believe that there is one more leg up (the z) to go.

Primary B is similar to wave 2. The bullishness in wave 2 is usually as high as the previous peak (prior to the start of wave 1) or even higher that the previous peak. But we are no where near extreme bullishness. When the correction kicks in after y, a lot perma bears will come out singing their song and will claim that this is the beginning of the much anticipated Primary C. But this correction might just test the 200 D MA and surge up from there to lauch the final stab in the form of z. At that point in time, the bulls will start singing their song and bring the S&P 500 close to 1500 (remember that the previous all time high was  around 1576). That is when the bullishness will be at it’s peak and ripe for Primary C.

S&P500 5-Year Primary Elliott Wave Chart 6 Feb 2012

Alternate Count 1

The Alternate Count 1 is similar to the Primary count with the only difference being the Minor D of the Expanding Triangle is still in progress in a a-b-c with a completed and b completing soon to be followed by c. This c is expected to bring the S&P 500 to 1000 region before the S&P 500 embarks on Minor E with a target fo 1500. This c wave and the y wave of the Primary count are similar expect in the depth of correction. If y extends strongly then it could well be this c and that would promote the Alternate count to be the Primary count.

S&P500 5-Year Alternate Elliott Wave Chart (1) 6 Feb 2012

Alternate Count 2

Alternate Count 2 is the bearish count. In this count, the Primary B is deemed to have completed at 1370 in May 2011. The move down after that is counted as Inter 1 with Inter 2 in progress. Inter 2 will be invalidated if it goes beyond 1370.58.

S&P500 5-Year Alternate Elliott Wave Chart (2) 6 Feb 2012

 

S&P 500 EOD Review 13 Dec 2011

The final leg e of the Expanding Triangle is in place and the next likely move is upwards. Note that the top of the Triangle (blue line) that was formed from 27 Oct till 15 Nov has been tested a few times and it has provided support so far. A divergence on the MACD is developing indicating that the selling is losing momentum even with increased volume. Market is going to move up from here.

S&P 500 EOD Elliott Wave Chart 13 Dec 2011

Alternate View

The Alternate view is that the S&P 500 is in Submicron 3 of Subminuette iii. Being 3 of 3, it should be a strong move but that is not happening which is why this is the alternate view. Also, this move is looking quite choppy. But note that the S&P 500 is slowly edging lower. It could just result in a major sell off if any bad news or some negative development takes place.

S&P 500 Fibonacci Confluence

S&P 500 Fibonacci Confluence band is being broken down. The piercing is getting deeper. This is not looking good.

S&P 500 Daily Fibonacci Chart 13 Dec 2011

S&P 500 Volume

The volume increased slightly but not enough for the bears. Also, the MACD is diverging upwards.

S&P 500 Daily Volume Chart 13 Dec 2011

S&P 500 5-Year Review

The S&P 500 sold off heavily at 1074 and a lot of people were expecting the S&P 500 to head lower still to 1000 or even 850 region but that did not happen and it snapped up from there on. We are at 1257 after the sharp move up which was followed by a Triangle. It is highly likely that we are at the final subwave e of the Triangle.

With all these volatile moves, it has shaken both the bulls as well as the bears. It is timely to do another review of the longer term charts to get an overview of where we could possibly be.

The below chart depicts my Primary count all along with some changes. Primary wave [B] is still in progress in a complex w-x-y combination. The first Intermediate wave and (X) are completed. The final Intermediate wave (Y) is in progress in an Expanding Triangle. Waves A-B-C completed and either wave D has ended or could still be in progress. There is an alternate view within chart. The wave E is expected to bring the S&P 500 to a high of 1450 to 1550.

One of the issues with this chart is that wave B has travelled too far low but wave D did not travel far enough. One possibility is that wave D has not completed and it could travel as low as 870 region.

S&P500 5-Year Primary Elliott Wave Chart

The below chart is the Alternate Elliott Wave Chart. The S&P is still in a corrective Primary wave [B]. The Primary [B] has taken the shape of a complex w-x-y. is a double zig-zag, (X) is an complex correction and (Y) is in progress in the shape of another Expanding Triangle. Wave (X) does look like an Expanding Triangle and we know that it is unlikely for an Expanding Triangle to be followed by another Expanding Triangle. (X) could be some kind of flat or complex correction. But the important thing in this chart is that it fits the extremes quite well and we can see an Ending Expanding Triangle forming. The subwaves A-B-C-D can be distinctly identified with clear end points.

The final wave E is in progress and the target is 1500 region to complete Primary [B]. This count is gaining traction as the recent moves are going in its direction.

S&P500 5-Year Alternate Elliott Wave Chart

Another Alternate count which is extremely bearish is that Primary wave [B] ended at 1370 and what we are seeing now is Intermediate wave (2) of Primary [C].

S&P500 5-Year Alternate 2 Elliott Wave Chart

We are at point of indecision whereby we have 2 Intermediate bullish and 2 Intermediate bearish counts. This sort of explains the sudden pause in the market moves since end of Oct 2011.

Let’s take a look at the daily chart of the recent moves and see if we can get clues to which way the market is going to go next. The S&P 500 is clearly in a Triangle and quite possibly we are at the final leg of the Triangle. Triangles normally occur as the final wave of a move or preceding the final wave of the move. The Triangle we have here is a Symmetrical Triangle which is usually a continuation pattern. There are two possibilities for this Triangle.

1) Preceding the final wave – Based on Elliott waves, this is the most likely event. This would mean that another up wave is going to pan out once the Triangle resolves. There are a few targets for this move. One possible target is measure using the widest part of the Triangle and adding that to the breakout point. This yields a target of 1342 which is near 61.8% of the first wave up from 1074. The second target is by assuming that the final wave is same in price length as the first wave. This yields a target of 1456.

2) Final wave – If this is the final wave, then the next move would be to the downside.

We need to watch carefully to see which way the Triangle resolves to determine the next move.

15 Nov 2011 S&P500 EOD Elliott Wave Chart