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Elliott Wave chart analysis for the S&P 500 for 2nd November, 2011. Please click on the charts below to enlarge.

S&P 500 daily 2011

Yesterday’s analysis expected a little upwards movement to a short term target at 1,234.42, to be followed by downwards movement. Price did move higher but reached 1,242.48, 8.06 points above the target, before turning downwards again. Price has not yet made a new low.

The best wave count which I can see at this stage, where all the subdivisions fit and proportions look good, is our main wave count above which sees black wave (3) within primary wave 3 within cycle wave c as just begun. Another couple of strong downwards days will add confidence to this big trend change.

Although at this stage I am struggling to see a good fitting alternate allowing for further upwards movement within wave (2) black, there is a very slim possibility that wave (2) black may continue yet higher as a triple zigzag structure. The rarity of triple zigzags in the stock market means such a wave count has a very low probability. If price were to move above 1,292.66 that would be the only wave count that I could see at this stage which would explain further upwards movement.

Our targets remain the same. At 905.70 wave (3) black would reach 1.618 the length of wave (1) black. If price were to continue lower past this first target then the next Fibonacci ratio in the sequence is 2.618 the length of wave (1) black which is at 666.54.

Our long term target for primary wave 3 to end is at 450.14 where it would reach equality in length with primary wave 1.

Within wave (3) black no second wave correction may move beyond the start of its first wave. This wave count is invalidated with movement above 1,292.66.

Main Hourly Wave Count.

S&P 500 hourly 2011

Wave ii pink ended higher, 8.06 points above the short term target we had for it. There is no Fibonacci ratio between waves (a) and (c) green of the flat correction for wave ii pink.

If wave ii pink is now complete then we should not see any further movement above 1,242.48. Wave iii pink downwards should exhibit increasing momentum.

At 1,120.69 wave iii pink would reach 1.618 the length of wave i pink. If price moves through this first target and the structure requires further downwards movement then we shall use the second target. At 1,045.42 wave iii pink would reach 2.618 the length of wave i pink.

If price moves above 1,242.48 tomorrow then we shall use the alternate hourly wave count below.

Alternate Hourly Wave Count.

S&P 500 hourly alternate 2011

It is possible that wave ii pink is incomplete and may move yet further sideways and higher as a double flat or double combination correction.

The last waves down and up to end Wednesday’s session subdivide on the 5 minute chart into 5-3. This may be 1-2 as for our main wave count, or a-b as for this alternate.

Wave (x) green should subdivide into a zigzag. When the next wave downwards for c orange is complete then movement back into wave a orange price territory would indicate that this alternate is correct. At that stage for our main wave count we would count this recent movement as 1-2-3, and be expecting a fourth wave to remain below wave 1 price territory.

If wave ii pink does continue as a double then it is not as nicely in proportion to wave i pink as the main hourly wave count. For this reason I expect that this alternate has a slightly lower probability than the main hourly wave count.