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The S&P 500 has not done exactly as expected and it now seems that the upwards movement may unfold as an ending diagonal structure indicating slow upwards gains.

Click on the charts below to enlarge.

S&P 500 daily 2011

Price continues to move overall higher about the mid line of the parallel channel containing wave Y blue zigzag, as we expect. The structure of wave c pink is still incomplete. We should expect this week further overall upwards movement, with downwards and sideways corrections along the way.

Waves a and b pink both lasted a Fibonacci 8 days. Wave c pink has now lasted 19 days. The next Fibonacci number in the sequence is 21 which would see wave c pink end this Friday the 20th of January. However, Fibonacci time relationships are not as reliable as Fibonacci price ratios between waves so this date is a rough guide only.

At 1,311 wave c pink would reach equality with wave a pink and we may see the correction for wave (2) black complete here.

When this parallel channel is breached by downwards movement then we shall have confirmation that wave Y blue zigzag is over and wave (3) black downwards should be underway.

Wave (2) black is a double zigzag, which is a relatively common structure. Triple zigzags are relatively rare structures, and when the second zigzag for wave Y blue is complete the probability that wave (2) is over will be very high.

Wave (2) black may not move beyond the start of wave (1) black. This wave count is invalidated with movement above 1,359.44.

There are two ways to look at most recent movement and we still have main and alternate hourly wave counts. We may have to run them side by side until one or the other is invalidated.

Main Hourly Wave Count.

S&P 500 hourly 2011

This main hourly wave count has the best fit in terms of proportions, and for that reason it may have a slightly higher probability than the alternate.

The trend channel is constructed to contain most of the price movement within wave c pink and we may see wave (v) green end in the middle or at the upper trend line of this trend channel.

A ratio within wave c pink is: wave (iii) green is 2 points longer than 1.618 the length of wave (i) green.

At 1,318 wave (v) green would reach equality with wave (i) green. This target is 7 points above the target for wave c pink. There is however an adequate Fibonacci ratio for wave (iii) green with wave (i) green and therefore it makes a ratio for wave (v) green to either of waves (i) or (iii) green less likely.

Wave (v) green may be unfolding as an ending diagonal as wave i orange within wave (v) green is best counted as a zigzag. Within an ending diagonal all the sub waves are required to subdivide into zigzags and the fourth wave has to retrace into the price territory of the first wave. This would allow for a deep retracement once wave iii orange completes.

Movement below 1,290.99 would invalidate this wave count as wave iv orange within the ending diagonal for wave (v) green may not move beyond the start of wave iii orange.

Alternate Hourly Wave Count.

S&P 500 hourly alternate 2011

This alternate wave count differs in the degree of labeling and sees wave (iii) green as incomplete. It expects the ending diagonal is wave v orange within wave (iii) green.

This alternate has the same expectation for next movement as the main wave count. It expects one more fourth wave correction on the way up than the main wave count.

The parallel channel drawn here is Elliott’s second technique. Wave v orange is likely to test the upper trend line of this trend channel.

At 1,318 wave v orange would reach equality with wave i orange, the same as the target for wave (v) green on the main hourly wave count. The 1.618 Fibonacci ratio of wave (i) green for wave (iii) green is at 1,295 and as already been exceeded.

The invalidation point is the same as the main hourly as wave 4 purple within wave v orange may not move beyond the start of wave 3 purple within the ending diagonal for wave v orange.