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Yesterday’s analysis expected that a small fourth wave correction was over and that price would move higher during Thursday’s session. This is not what happened.

Downwards movement is a continuation of the small fourth wave correction as a double zigzag. Price remained above the invalidation point and the wave count is mostly the same.

Click on the charts below to enlarge.

Main Wave Count.

S&P 500 daily 2013

This wave count has a higher probability than the alternate. Upwards movement over the last 4 1/2 years subdivides best as a zigzag. If something is “off” about the supposed recovery then it must be a B wave because there is plenty that is off in this scenario in terms of social mood.

Downwards corrections may now find support along the upper edge of the big maroon channel from the monthly chart, if the upper trend line is pushed out to encompass all of primary wave A.

Intermediate wave (5) is incomplete, with minor wave 1 completed and minor wave 2 most likely completed.

At 1,826 minor wave 3 would reach 0.618 the length of minor wave 1. Minor wave 1 is extended, so minor waves 3 and 5 may not be.

Also now at 1,826 minute wave v would reach equality in length with minute wave iii. This increases the probability of this target.

At 1,864 intermediate wave (5) would reach equality in length with intermediate wave (1). This is the most common ratio between first and fifth waves so this target has a good probability.

Within minor wave 3 minute wave ii may not move beyond the start of minute wave i. This wave count is invalidated with movement below 1,746.20.

S&P 500 hourly 2013

Downwards movement for Thursday’s session subdivides as a zigzag. Minute wave iv is now showing perfect alternation with minute wave ii: minute wave ii was a relatively shallow 47% single zigzag, and minute wave iv is a deeper 60% double zigzag.

Minute wave ii lasted two days, and now minute wave iv is also two days in duration.

It is now even more likely that this fourth wave correction is over here.

At 1,821 minute wave v would reach 1.618 the length of minute wave i. This gives a rather wide 5 point target zone. When there is more structure within minute wave v to analyse I will add to the target calculation at minuette wave degree, and I will try to narrow this target zone for you.

When fourth waves overshoot the channel drawn using Elliott’s first technique then we redraw the channel using his second technique. Draw the first trend line from the lows labeled minute waves ii to iv, then place a parallel copy upon the high labelled minute wave iii. I will expect minute wave v to most likely end mid way within this channel, and slightly less likely to end about the upper edge where it should find resistance.

On the five and one minute chart subminuette wave c within minuette wave (y) of minute wave iv subdivides into a completed five wave impulse, with a very clear third wave in the middle of it. There is not quite enough upwards movement at the end of the session to confirm that the final fifth wave will not extend lower. Movement above 1,787.60 would give me confidence that minute wave iv is finally completed. At that stage I would move the invalidation point up to its end at 1,777.23, and expect upwards movement for minute wave v.

While price remains below 1,787.60 I must admit there is a possibility that the fifth wave within subminuette wave c could extend lower. If this happens, and minute wave iv continues, then it may not move into minute wave i price territory. This wave count is invalidated with movement below 1,773.44.

Alternate Wave Count.

S&P 500 daily alternate 2013

It is possible that a new cycle degree bull market began at 666.79. So far it is not yet halfway through, and I would expect it to last for a few years (at least five more years and maybe longer).

At some stage then the current upwards impulse, labeled intermediate wave (5) for the main wave count and minor wave 5 for this alternate, will be completed. At that stage both wave counts would expect a trend change. The main wave count would expect a huge cycle degree trend change, and this alternate would expect an intermediate degree trend change. If the downwards movement subdivides as a three and remains within the maroon channel then this alternate would be preferred. If it breaches the channel this alternate would be discarded.

The maroon – – – channel is an acceleration channel drawn about primary waves 1 and 2 on the monthly chart (it is drawn in exactly the same way on the main wave count, but there it is termed a corrective channel). I would not expect intermediate wave (2) to breach this channel because a lower degree (intermediate) wave should not breach an acceleration channel of a higher degree (primary) first and second wave.

The daily chart shows the structure of minor wave 5. It is incomplete. Targets are the same because they are calculated using the same wave lengths as the main wave count. This bullish alternate does not diverge from the main wave count at this stage, and it will not for some weeks to come.