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.
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.
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.
Elliott Wave Analysis 