Elliott Wave chart analysis for the SPX500 for 18th October, 2010. Please click on the charts below to enlarge.

Yesterday’s upwards movement to a new high may again have ended this second wave correction. If it was over at 1,185.4 on the 17th of October then wave C pink was 35 days in duration, just one day longer than a fibonacci 34 which is an acceptable deviation.

I have two wave counts for you again today. Upwards movement may be over with the high of 1,185.4 as we can see a complete structure for wave 5 green of wave C pink. Alternatively, I can see a wave count which requires further upwards movement.

We need to see a full candlestick below the lower edge of the smaller pink parallel channel drawn using Elliott’s technique about wave C pink to confirm a trend change at minor degree.

Any further upwards movement should not move above 1,220 as wave 2 blue cannot move beyond the start of wave 1 blue.

Main Wave Count

This wave count on a 2 hourly chart shows all of wave 5 green.

This wave count expects one more upwards push, most likely to a new high, before a trend change.

Within wave 5 green, wave 3 orange is just 3.3 points longer than equality with wave 1 orange. When we know the end to this wave 4 orange correction then a target for wave 5 orange, and the end to upwards movement, can be calculated. Wave 5 orange is likely to be 0.618 the length of wave 1 orange which is 20 points in length.

At 1,170.6 wave C purple of wave 4 orange will reach equality with wave A purple. At 1,166.6 wave 4 orange will correct to the fourth wave of one lesser degree (4 purple). This is the target zone for downwards movement for wave 4 orange.

Thereafter, expect further upwards movement in a five wave structure for wave 5 orange to end this second wave correction at minor (blue) degree.

Because wave 4 orange cannot move into wave 1 orange price territory this downwards correction may not move below 1,163.6

Alternate Wave Count

Upwards movement may be over. This wave count has an ending expanding diagonal to end wave 5 orange.

If this wave count is correct ratios are:

Pink wave C is 25.1 points longer than pink wave A and has no fibonacci ratio to A.

Ratios at green degree are: wave 3 green is just 1.9 points short of equality with wave 1 green and green wave 5 has no fibonacci ratio to either 3 or 1.

Ratios at orange degree within green wave 5 are: orange wave 3 has no fibonacci ratio to wave 1 but wave 5 is just 0.5 points short of 4.236 the length of wave 1.

Wave 5 orange is an ending expanding diagonal: wave 4 purple is longer than wave 2 purple, wave 3 purple is longer than wave 1 purple, but wave 5 purple is not longer than wave 3 purple. Wave 5 purple is longer than wave 1 purple and wave 3 purple is the longest. This is acceptable (please refer to figure 1-18, pg 39, Chapter 1 – The Broad Concept of “Elliott Wave Principle” by Frost and Prechter).

If upwards movement is over we need confirmation of a trend change by a breach of the trend channel on the daily chart. Price movement below 1,149.9 will eliminate the possibility of alternates which may see an extension of wave 5 orange as any second wave correction within it cannot move beyond the start of it’s first wave.