Elliott Wave chart analysis for the S&P 500 for 22nd December, 2011. Please click on the charts below to enlarge.
Again the S&P 500 moved higher as expected. Within wave c pink upwards there are a couple of possible interpretations and both require further upwards movement to complete the structure.
Wave c pink is highly likely to take price to a new high above the end of wave a pink at 1,267.06 to avoid a truncation. Wave Y blue is highly likely to take price to a new high above the end of wave W blue at 1,292.66 to achieve the purpose of a double zigzag, which is to deepen a correction.
At 1,311 wave c pink would reach equality in length with wave a pink. This is the most likely target for upwards movement to end.
We may draw a parallel channel about the zigzag for wave Y blue. Wave c pink may end about the upper edge of the channel, or with a small overshoot.
Waves a and b pink both lasted a Fibonacci 8 days. If wave c pink continues this pattern and also lasts a Fibonacci 8 days it would end on Friday 30th December.
Movement above 1,267.06 would confirm this wave count at intermediate (black) degree because at the point our first alternate wave count would be invalidated.
Within wave c pink no second wave correction may move beyond the start of its first wave. This wave count is invalidated with movement below 1,202.37.
Wave (2) black may not move beyond the start of wave (1) black. This wave count is invalidated with movement above 1,359.44.
It looks most likely that wave (i) green is complete, and within wave (iii) green only wave i orange so far is complete.
If this interpretation of upwards movement is correct then we should see an increase in upwards momentum for the next couple of trading days as the middle of wave c pink unfolds.
Wave ii orange is an incomplete structure on the 5 minute chart. Wave ii orange may not move beyond the start of wave i orange. This wave count is invalidated with movement below 1,229.51.
At 1,295 wave (iii) green would reach 1.618 the length of wave (i) green.
At 1,311 wave c pink would reach equality in length with wave a pink. This target may be reached on the 30th December.
Alternately, it is possible that wave (iii) green may have been over at the high labeled i orange, and very close to 0.618 the length of wave (i) green. This possibility has a lower probability though because third waves are often the longest wave. If price remains above 1,242.82 this possibility will remain and a truncated early end to upwards movement for wave c pink will be possible.
Alternate Wave Count.
This wave count has a low probability because wave C blue within the zigzag for wave (2) black is severely truncated. However, the subdivisions fit.
Only if we saw very strong downwards movement from this point below 1,158.66 would we need to use this wave count. At that stage it would provide a valid explanation.
Within wave (3) black no second wave correction may move beyond the start of the first wave. This wave count is invalidated with movement above 1,267.06. If this wave count is invalidated by upwards movement then our main wave count could be considered confirmed.
Second Alternate Wave Count.
There are four reasons why I consider this wave count to have the lowest probability:
1. Wave iv pink is not an obvious zigzag and it should be.
2. Wave iv pink is already deeper than 0.81 of wave iii pink; this is the maximum common length for wave 4 within a diagonal in relation to wave 3.
3. While leading diagonals are not uncommon, leading expanding diagonals are supposedly less common structures.
4. A similar wave count on the Dow is invalidated; the Dow and S&P 500 have been moving together nicely for some time and it would be highly unusual for them to now diverge.
Within the leading diagonal for wave 1 blue wave iv pink may not move beyond the end of wave ii pink. This wave count is invalidated with movement above 1,277.55.
A leading diagonal may not have a truncated fifth wave. This wave count requires movement below 1,158.66 to remain valid.