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Elliott Wave chart analysis for the SPX500 for 4th January, 2011. Please click on the charts below to enlarge.

SPX500 daily 2011

Downward movement has increased the probability that we have seen a trend change. However, while price remains above 1,253.4 the trend change is unconfirmed. On the hourly chart we do not have yet a clear five wave structure to the downside; so far downward movement is a three.

With further upward movement for wave B pink this wave count is looking less likely. The most likely length of wave B in relation to wave A within an expanded flat correction is up to 138% of A. So far wave B is 189% of A, which is within allowable limits but is less likely.

In the long term we may see wave C black end about 1,349.9 where it reaches 0.618 the length of wave A black, or at 1,561.2 where it reaches equality with wave A black. This second target is more likely as equality is the most common relationship between waves A and C within a zigzag.

Upward movement may not move above 1,576.09 as primary wave 2 may not move beyond the end of primary wave 1.

Downward movement for this wave count may not move below 1,129.9 as wave 4 blue may not move into wave 1 blue price territory. If this wave count is invalidated by downward movement then we must consider the possibility that primary wave 2 is over and primary wave 3 is underway.

Main Hourly Wave Count.

SPX500 hourly 2011

Downward movement so far is a clear three wave structure. If price remains above 1,262.1 then the likelihood that we are still to see higher highs for the S&P will increase. Any further extension downward of wave 2 aqua may not move beyond the start of wave 1 aqua. Therefore, this wave count is invalidated with price movement below 1,253.4.

Ratios within wave A aqua are: wave 3 red has no fibonacci ratio to wave 1 red and wave 5 red is just 1 point longer than 1.618 the length of wave 3 red.

Within wave 2 aqua wave C red is 0.96 points short of 1.618 the length of wave A red.

This wave count expects a third wave to the upside which must move beyond the end of wave 1 above 1,276.1.

At 1,278.8 wave 5 orange will reach equality with wave 1 orange.

Alternate Hourly Wave Count.

SPX500 hourly 2011

If we see one more wave to the downside then recent movement since the high of 1,276.1 will have a five wave structure which will provide weight to this wave count.

Movement below 1,253.4 will confirm this wave count as that will invalidate the main hourly wave count.

In the short term any further upward extension of wave 4 purple of this possible diagonal may not move beyond the end of wave 2 purple above 1,273.6.

When wave 5 purple of the diagonal is over we should expect a second wave correction. Wave 2 orange may not move beyond the start of wave 1 orange. Therefore, this wave count is invalidated with movement above 1,276.1.

Alternate Daily Wave Count.

SPX500 daily 2011

Continuing upward movement makes this wave count seem more and more likely.

If wave 1 pink (or 5 blue) was over at Monday’s high then wave 1 pink (or 5 blue) would have lasted a fibonacci 34 days.

This wave count sees wave 5 blue to end wave C at intermediate (black) degree as unfolding. It may be over, if we move the degree of labeling for wave 5 blue up one degree. Or only the first wave within wave 5 blue may be ending, if this degree of labeling is correct.

If wave 5 blue and, therefore, C black are over then waves A and C black have no fibonacci relationship.