S&P 500 Elliott Wave Technical Analysis – 2nd July, 2014

The target for the bull and bear wave counts for the mid term remains the same. Both hourly Elliott wave counts remain the same, and they have a close to even probability.

Summary: Upwards movement is not over. But for the short term I expect to see a small fourth wave correction. It may move lower to a target at 1,941, or it could move sideways. It should last at least another four days and maybe up to eleven days.

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The aqua blue trend lines are critical. Draw the first trend line from the low of 1,158.66 on 25th November, 2011 to the next swing low at 1,266.74 on 4th June, 2012. Create a parallel copy and place it on the low at 1,560.33 on 24th June, 2013. While price remains above the lower of these two aqua blue trend lines we must assume the trend remains upwards. This is the main reason for the bullish wave count being my main wave count.

Bullish Wave Count.

S&P 500 daily 2014

This bullish wave count expects a cycle degree correction was over at 666.79 for a fourth wave, and a new cycle degree bull market began there for a fifth wave. Within cycle wave V primary waves 1 and 2 are complete. Within primary wave 3 intermediate wave (1) must be incomplete.

There are a couple of things about this wave count of which I am confident. I see minor wave 3 within intermediate wave (1) as over at 1,729.86 (just off to the left of the chart). It has the strongest upwards momentum and is just 0.76 longer than 2.618 the length of minor wave 1. At 455 days duration this is a remarkably close Fibonacci ratio. The subdivisions within it are perfect. If this is correct then minor wave 4 ends at 1,646.47 and this is where minor wave 5 begins.

Minor wave 5 may be only one of two structures: a simple impulse or an ending diagonal. At this stage an ending diagonal looks less likely, and current upwards movement is looking like a third wave so a more common impulse is more likely.

Along the way up towards the final target I would expect to see three more corrections complete. The first for subminuette wave iv is most likely to be somewhat in proportion to subminuette wave ii which lasted 17 days. So far subminuette wave iv has lasted only six days and is very likely to continue.

Subminuette wave iv may not move into subminuette wave i price territory.

At 2,010 minuette wave (iii) would reach 1.618 the length of minuette wave (i).

At 2,218 minor wave 5 would reach equality in length with minor wave 3.

I have drawn a parallel channel about minuette wave (iii) using Elliott’s first technique: draw the first trend line from the highs of subminuette waves i to iii, then place a parallel copy on the low of subminuette wave ii. Upwards movement of two days ago perfectly found resistance at the upper edge of this channel. If it gets down that far I would expect subminuette wave iv to find support at the lower edge.

There is still divergence with price trending higher and MACD trending lower on the weekly chart, and a little on the daily chart for most recent movement. This classic technical divergence supports indicates that a correction should unfold.

The large maroon – – – channel is copied over from the weekly chart. It is drawn in exactly the same way on bull and bear wave counts. For the bull wave count this channel is termed a base channel about primary waves 1 and 2. A lower degree second wave should not breach the lower edge of a base channel drawn about a first and second wave one or more degrees higher. The lower maroon – – – trend line differentiates the bull and bear wave counts.

Main Hourly Wave Count.

S&P 500 hourly 2014

There are multiple possibilities for subminuette wave iv. It is likely to show structural alternation with subminuette wave ii which was a double combination. Subminuette wave iv is most likely to be a flat correction or a triangle. A flat is somewhat more common than a triangle, and so this is my main hourly wave count.

At 1,941 micro wave C would reach 1.618 the length of micro wave A.

Within micro wave C no second wave correction may move beyond the start of its first wave above 1,978.58.

S&P 500 5 minute 2014

Alternate Hourly Wave Count.

S&P 500 hourly 2014

It is also entirely possible that subminuette wave iv may unfold as a running contracting triangle.

This alternate wave count expects choppy overlapping sideways movement for several more days. This wave count could see subminuette wave iv lasting as long, or nearly as long, as subminuette wave ii which lasted 17 days.

Within a contracting triangle micro wave C may not move beyond the end of micro wave A at 1,944.69. Micro wave D may not move beyond the end of micro wave B at 1,978.58.

Bearish Alternate Wave Count.

S&P 500 daily bear 2014

This bearish alternate wave count expects that the correction is not over. The flat correction which ended at 666.79 was only cycle wave a (or w) of a larger super cycle second wave correction.

Cycle wave b (or x) is now longer than the maximum common length of 138% for a B wave of a flat correction, at 152%.

The maroon – – – channel is here drawn using Elliott’s technique for a correction about cycle wave b. When the channel about this zigzag is breached that provides trend channel confirmation that the zigzag is over and the next movement is underway.

This analysis is published about 06:10 p.m. EST.