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As expected the S&P 500 has moved higher and another small impulse is unfolding on the hourly chart. At this stage our target zone remains the same and it looks likely that it shall be reached.

We still have two daily charts and we will use the invalidation point of the alternate wave count as confirmation of a trend change. When the alternate wave count is invalidated then the main wave count will remain as the only wave count, and at that stage we would have seen a trend change.

Click on the charts below to enlarge.

S&P 500 daily 2012

This main wave count has a higher probability than the alternate daily chart below because it sees wave W blue upwards as a three wave zigzag, which has a much better fit than trying to see it as a five wave impulse (the alternate idea).

Wave (B) black may move beyond the start of wave (A) black, and in fact for flat corrections this is most common. The maximum common length of B in relation to A within a flat is 138%. This would be achieved at 1,469. It is likely we shall see a trend change before this price point.

When wave (B) is complete then wave (C) must unfold in five waves down, as either an impulse or an ending diagonal. An impulse is the most likely and is easier to analyse. Wave (C) black does not have to make a new low below the end of wave (A) black, but it is extremely likely to do so.

There is unfortunately no clear Elliott wave rule regarding the length of wave (B) in relation to wave (A) for a flat correction. If price continues above 1,469 then this wave count would not be invalidated, but the probability would reduce significantly.

Movement below 1,267.06 would invalidate the alternate daily chart below and confirm this main wave count. At that stage we may have confidence that the S&P 500 has seen a trend change.

Movement below the parallel channel containing the zigzag for wave Y blue would also provide some indication of a trend change.

S&P 500 hourly 2012

Price did not move lower and it looks most likely that wave iv orange was a brief sharp zigzag. There is some alternation between waves ii and iv orange: wave ii orange was a very deep correction and wave iv orange was very shallow.

It looks most likely that wave v orange is unfolding as a simple impulse. Wave 3 purple is just 0.4 points longer than 2.618 the length of wave 1 purple.

At the end of Monday’s session it looks like wave 4 purple may be incomplete. We may see a very little downwards movement to begin Tuesday’s session, before upwards movement to a new high. Wave 4 purple may not move into wave 1 purple price territory. In the very short term this wave count is invalidated with movement below 1,343.27.

If we move the degree of labeling within wave v orange down one degree we may be seeing only wave 1 purple within wave v orange unfold. Wave 2 purple may not move beyond the start of wave 1 purple. This wave count is invalidated with movement below 1,337.35.

Wave v orange may end with an overshoot of the smaller orange parallel channel. It may find resistance about the upper edge of the wider green parallel channel.

The green channel is drawn first with a trend line from the lows of (ii) to (iv) green which can be seen on the daily chart, and then a parallel copy is placed upon the high of (iii) green.

Alternate Daily Wave Count.

S&P 500 daily alternate 2012

This alternate has a lower probability than the main daily chart, but we must consider it.

If the upwards wave labeled here A blue was a five, and not a three, then wave (B) black is a single zigzag. Wave C blue is incomplete.

Wave iii pink is most likely now complete and wave iv pink has begun. Wave iv pink may last about one to two weeks.

Wave iv pink may not move into wave i pink price territory and this wave count is invalidated with movement below 1,267.06.