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We expected upwards movement to a new high, and price has made a very slight new high, but this movement looks to be a continuing correction.

The structure is still incomplete and we should see a continuation of this trend towards our targets.

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

Upwards movement was expected and the S&P 500 did make a slight new high, but the upwards wave is a three and not a five.

I have checked subdivisions carefully on a 5 minute chart. The upwards wave labeled 1 purple is most easily seen as a five wave structure, the downwards wave labeled (W) aqua is a three, and the upwards wave labeled (X) aqua can only be seen as a three.

With a three down followed by a three up it looks like wave 2 aqua is incomplete and is continuing as a double zigzag correction. So far the downwards wave labeled (Y) aqua is unfolding as a zigzag which is either just complete or very close to completion at the end of Wednesday’s session.

Wave 2 purple may not move beyond the start of wave 1 purple. This wave count is invalidated with movement below 1,337.35.

Alternate Daily Wave Count.

S&P 500 daily alternate 2012

This alternate has a lower probability than the main daily chart.

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. At this stage it looks like wave iv pink may move price mostly sideways as a flat correction, or a combination beginning with a flat.

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