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Exactly as we expected price moved higher to find resistance at the upper edge of the parallel channel on the hourly chart. From there price moved lower.

We have only one daily and one hourly chart today. I am working on developing an alternate daily wave count which could allow for movement above 1,359.44 (or 1,370.58). I should have one for you in the next analysis to end this week, and I expect it will have a very low probability.

Click on the charts below to enlarge.

S&P 500 daily 2011

The structure within wave c pink is again complete. Because price is very close to the invalidation point on the Dow, and it has almost no room to move further upwards, the Dow must have had a trend change (if our wave count for that market is correct). It is very likely that the S&P 500 has just had a trend change during Thursday’s session. For this reason I have only one wave count for you today.

It would be wise to approach this market with caution at this stage. We may use the pink parallel channel about the zigzag of wave Y blue in the manner Elliott intended to confirm this trend change. When there is a full daily candlestick below the parallel channel we shall have confirmation of a trend change.

Wave (2) black is labeled here as a double zigzag structure, which is relatively common. The only way wave (2) black could continue further sideways when the second zigzag of Y blue is over is as a rare triple zigzag. The rarity of triples means this has a very low probability. Furthermore, the purpose of triple zigzags is to deepen corrections. Wave (2) black is already a very deep correction, over 80% of wave (1) black. It does not need to be deepened further.

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

When we have confirmation of a trend change then I will calculate targets to the downside for you. It would be premature to do this today.

S&P 500 hourly 2011

The upper edge of the parallel channel nicely showed us where this trend found resistance, initiating a bounce downwards.

For this trend change to be confirmed we need to see initial movement below this parallel channel. Price may find support at the lower end of the channel, but if there has been a big trend change it should thereafter break through the lower trend line. Movement below 1,306.06 would indicate that the impulse labeled v orange is over and provide initial trend change confirmation.

Waves a and c pink have no Fibonacci ratio to each other.

Ratios within wave c pink are: wave (iii) green is 1.7 points longer than 1.618 the length of wave (i) green, and there is no Fibonacci ratio between wave (v) green and either of (i) or (iii) green.

Ratios within wave (v) green are: wave iii orange is 1.56 points longer than 4.236 the length of wave i orange, and wave v orange is 2.43 points longer than 2.618 the length of wave i orange.

Ratios within wave v orange are: wave 3 purple is 0.28 points short of 1.618 the length of wave 1 purple, and wave 5 purple has no Fibonacci ratio to either of 1 or 3 purple.

There is continuing divergence between price trending higher and MACD trending lower. This upwards movement has a look typical of an expiring or expired trend.

Friday’s session should take price lower. So far within downwards movement from the high there is a lot of overlapping on the 5 minute chart. This strongly suggests a leading diagonal in a first wave position, which is likely to be followed by a very deep second wave correction. Wave 2 may not move beyond the start of wave 1 and any movement above 1,333.47 would invalidate this wave count.

If this wave count is invalidated by upwards movement then the wave count at primary degree on weekly and monthly charts is highly suspect. If the Dow makes a new high above 12,876 my wave count for that market at primary degree is invalidated. This would be very significant and would indicate further upwards movement. At this stage I consider the probability that this could happen to be extremely low, and I will outline why in the next analysis for the weekend.