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Last analysis expected upwards movement during Tuesday’s session which did not happen. Price moved lower in a small range.

I have the same daily wave count and a very slightly adjusted hourly wave count for you today.

Click on the charts below to enlarge.

S&P 500 daily 2012

We have recently seen a major trend change in the S&P 500 and the DJIA. This wave count sees the trend at primary degree, so targets are long term and they are months away.

Within the new downwards trend we may be seeing a series of first and second overlapping waves complete. The most commonly extended wave within an impulse is the third wave, and within wave iii pink we should expect wave (iii) green to likely be extended. This necessarily begins with a series of overlapping first and second waves, and this wave count has a very typical look.

Cycle wave a is an expanded flat correction: primary wave A was a three wave structure, and primary wave B was a triple zigzag and 140% the length of primary wave A.

At 1,013 primary wave C would reach 1.618 the length of primary wave A. If price continues downwards through this first target then the next target is at 728 where primary wave C would reach 2.618 the length of primary wave A.

I have tried to see various combinations of a leading diagonal in the first waves after the high of 1,474.51 labeled primary wave B. I cannot find a scenario which fits expected wave lengths for a diagonal, and it would be neither expanding nor contracting. This scenario charted has a much higher probability.

S&P 500 hourly 2012

With an extremely clear channel breach and no new high it must be accepted that wave 2 purple is most likely over.

With wave 1 red ending a little higher it is possible to see wave (C) aqua as a complete five wave impulse.

There is no Fibonacci ratio between waves (A) and (C) aqua.

Within wave (C) aqua there are no Fibonacci ratios between waves 1, 3 and 5 red.

To the downside the last two sessions slow movement may be a leading diagonal unfolding for wave (1) aqua. Wave 1 red subdivides as a three which is allowable within a leading diagonal. Wave 3 red must make a new low below the end of wave 1 red at 1,397.68. Wave 4 red must overlap wave 1 red price territory. Wave 5 red must make a new low below the end of wave 3 red, and it may not be truncated.

Thereafter, wave (2) aqua should be a very deep correction as second waves often are following a leading diagonal in a first wave position. Wave (2) aqua may not move beyond the start of wave (1) aqua. This wave count is invalidated with movement above 1,409.16.

I would expect choppy overlapping generally trending downwards movement for the rest of this week to end this possible diagonal, before a deep upwards correction. When that is done the next movement down may be explosive. This may begin next week.