Elliott Wave chart analysis for the S&P 500 for 19th April, 2011. Please click on the charts below to enlarge.

The S&P 500 moved upwards in a continuation of wave 4 orange. This should be followed by one final wave down to end this second wave correction.

At 1,367.38 wave 5 blue will reach equality with wave 1 blue. This target may be too low. When price approaches this first target, if the structure requires further upwards movement, we will use the second target.

At 1,553.42 wave 5 blue will reach equality with wave 3 blue. At 1,564.02 wave C black will reach equality with wave A black. This is the second more likely target for primary wave 2 to end.

At this stage we can see a complete five wave structure within wave 5 blue. However, wave behaviour does not support a wave count which sees primary wave 3 underway. When primary wave 3 arrives we should see very strong downwards movement.

When the wide blue channel drawn here about wave C black impulse is breached to the downside with at least a full daily candlestick below it then we shall have confirmation of a trend change at primary degree.

Wave 2 pink may not move beyond the start of wave 1 pink. This wave count is invalidated with movement below 1,249.05.

Wave C green is still an incomplete impulse. It requires a final fifth wave downwards to end it.

Wave 3 orange is just 0.66 points longer than 11.09 times the length of wave 1 orange. This is an unusual fibonacci ratio but it is mathematically correct.

At 1.292.61 wave C green will reach equality with wave A green. At 1,295.91 wave 5 orange will reach 0.618 the length of wave 3 orange. This is our target for the next small downwards wave to end.

Wave 4 orange may not move into wave 1 orange price territory. This wave count is invalidated in the short term with movement above 1,320.47.

At this stage movement above 1,320.47 would indicate that wave C green and therefore wave 2 pink was over and wave 3 pink upwards would be underway.

When we have a known end for wave 2 pink then we may calculate a target upwards for wave 3 pink.

Lara – why wouldn’t you count Wave 3 Orange as a complete 5 waves down to end the C wave?

It looks complete to me.

That would be because I got that one wrong. It was complete and invalidation of the count confirmed it.

I was looking at a 15 minute chart and it has a count of 7 which is corrective, requiring two more waves to complete the impulse. But on the hourly yes, it looks complete.

Hey Lara – i was just wondering if you think your pink c and thereafter pink 1 of the 5th wave could form part of a 4th wave. i.e. “c” is actually “a” of a 4th wave and “1” is wave “b” with us just having “c”, and “d” and “e” to come and then a final 5th – that may or may not be a double top / truncation. One reason i ask is that blue wave 2 and 4 are zigzags (no alternation) and second wave 5 as is will be very bullish (which surely would call P3 into question). If this 4th wave scenario were correct then the lower end of the triangle e wave might slightly overshoot the trend line and most folks would call the bull move over.

Extensions – a rule is wave 1,3 and 5 cant ALL be extensions (i am nor sure if a diagional in wave 1 counts as an extension) also as a guideline if wave 3 extends, then wave 5 will tend toward 1 or be related by a fib number. I am looking at page 86 and 87 of the F&P book. Assuming equality that could probably only give your 1st target for 5 if 4 was a triangle , unless i suppose 5 is a diagonal.

your thoughts would be appreciated.

You are correct, it could still be all a fourth wave triangle. As we continue upwards this is a possibility that I will have to keep in mind and will chart as we get closer to 1,344.07. However the upwards wave which I have labeled as 1 pink would then have to be a B wave within a triangle. These usually have a strong zigzag look, an exaggerated three, and this one is not.

The guideline of alternation is a guideline and not a rule because we don’t always see alternation. Wave 2 blue was a deep zigzag and wave 4 blue a shallow zigzag (as the main wave count sees it) so there is no alternation in structure, but there is alternation in depth of correction.

Primary wave 2 may move right up to the start of primary wave 1, and second waves can do this creating perfect double tops or bottoms, right before a strong third wave develops in the opposite direction. So a long fifth wave does not call primary wave 3 into question, it just means a very deep second wave correction is completing. Wave 3 blue is extended, and the fifth wave may also be extended. The first wave does not have an extended look at all, and a leading diagonal could not be considered an extension. Extensions have long drawn out looks, exactly what we see for the third wave.

The first target is where 5 will equal 1, which as you rightly point out is what we would expect if the third wave is extended as this one is.

The second target is also likely, and entirely possible, if both waves 3 and 5 blue are extended. Importantly this second higher target also sees black A and C as reaching equality which is a pretty common relationship for the two.