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Elliott Wave chart analysis for the S&P 500 for 6th October, 2011. Please click on the charts below to enlarge.

S&P 500 daily 2011

As expected from last analysis the S&P 500 moved higher during Thursday’s session. The S&P 500 is now within the target zone for this upwards movement.
Also, movement above 1,159.61 invalidated our alternate wave count.

This downwards movement cannot be a series of first and second waves, and at this stage the only structure which fits is a diagonal.

A leading diagonal requires subwaves 2 and 4 to be zigzags, and subwaves 1, 3 and 5 are usually zigzags but may also be impulses.

Wave iii pink is longer than wave i pink, and wave iv pink is now longer than wave ii pink, so the diagonal is expanding. For an expanding diagonal we should expect the fifth wave to fall short of the 1-3 trend line.

When the leading diagonal for wave 1 blue is complete we should expect a deep correction for wave 2 blue up to reach 0.786 the length of wave 1 blue. Thereafter, wave 3 blue down should be strong and extended.

Wave 2 blue may not move beyond the start of wave 1 blue. This wave count is invalidated with movement above 1,220.37.

S&P 500 hourly 2011

Price is now within our target zone calculated in last analysis and the structure for wave iv pink may be complete.

I have checked the structure of wave iv pink on 5 and 1 minute charts. The final fifth wave within wave (c) green is a complete structure with excellent Fibonacci ratios. If it does extend any higher it should not be by much.

What seems most likely for Friday’s session is downwards movement.

The diagonal is expanding so the fifth wave must be longer than the first wave at least. It should be longer than the third. Wave v pink would each equality with wave iii pink at 1,044.46. This is our target for downwards movement to end, and it is likely that it will be at least reached if not exceeded by a little.

When we have waves (a) and (b) green within wave v pink we may calculate a more accurate target for wave v pink to end.

Wave v pink is most likely to be a zigzag, but it may also be an impulse.

A leading diagonal may not have a truncated fifth wave so price must make a new low below 1,094.41.

Movement below 1,155.07 would indicate that wave iv pink is complete and wave v pink is underway. This is the start of wave v orange within wave (c) green of wave iv pink, and movement below this point indicates that the final fifth wave within wave (c) green is complete.