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Yesterday’s analysis expected some upwards movement from the S&P 500 for Thursday’s session from both hourly wave counts which is what we have seen.

The wave counts remain the same. The main wave count assumes the trend remains the same, because at this stage we have no confirmation of a trend change.

Click on the charts below to enlarge.

Main Wave Count.

S&P 500 daily 2013

This structure is nearing completion. Cycle wave b is a double zigzag and the end of the second zigzag is nearly over. Intermediate wave (C) is unfolding as a simple impulse and remains recently contained within its trend channel. Price may find resistance at the upper end of this channel. Draw it first with a trend line from the lows of minor waves 2 to 4, then place a parallel copy upon the high of minor wave 3.

Cycle wave b is now 105% the length of cycle wave a and so this structure at super cycle degree is an expanded flat correction, the most common type of flat.

At 1,590 intermediate wave (C) would reach 0.618 the length of intermediate wave (A). At 1,591 minor wave 5 would reach 1.618 the length of minor wave 1.

When price reaches this target zone we will use an alternate wave count to see if the structure could be complete and a trend change could occur.

Movement below the channel containing intermediate wave (C) would be initial confirmation of a trend change. While price remains within this channel we shall expect more upwards movement.

Within minute wave v no second wave correction may move beyond the start of its first wave. This wave count is invalidated with movement below 1,538.57.

S&P 500 hourly 2013

Within the final upwards zigzag of minuette wave (v) subminuette waves a and b may now be complete. Alternatively, only micro waves 1 and 2 within subminuette wave a may be complete. Either way the structure requires more upwards movement.

Minute wave v is an ending expanding diagonal. Within it minuette wave (v) should be longer than minuette wave (iii) and so should reach above 1,577.

Within a diagonal the fourth wave should overlap into the first wave price territory. Minuette wave (iv) may not move beyond the end of minuette wave (ii). This wave count is invalidated at minuette wave degree with movement below 1,546.22.

Alternate Wave Count.

S&P 500 daily 2013

It is possible that we have seen a trend change from the first target zone which was 1,573 to 1,575. Because we have no confirmation of this trend change this will be an alternate wave count.

There is a bearish engulfing candlestick pattern.

Cycle wave c would be extremely likely to take price to new lows below the end of cycle wave a at 666.79, and to last one to several years. Because this is an extremely big trend change it is wise to wait for some confirmation before having any confidence in this wave count.indicating a trend change.

Initially we need to see the main wave count invalidated with movement below 1,538.57 to have any confidence at all in this wave count. Movement below the channel drawn about intermediate wave (C) would give some more confidence in this wave count.

Final full confirmation would come with price movement below 1,409.16 as at that stage downwards movement could not be just a fourth wave correction within intermediate wave (C) and so it would have to be over.

S&P 500 hourly 2013

On the hourly and five minute charts the downwards movement labeled here minuette wave (i) subdivides nicely into a five wave impulse. This fits this alternate wave count better than the main wave count.

Upwards movement for a correction began as expected during Thursday’s session, and the structure is incomplete. At 1,565 subminuette wave c would reach equality in length with subminuette wave a and minuette wave (ii) would end just above the 50% mark of minuette wave (i).

If price moves higher through this target expect it to find resistance about the lower edge of the parallel channel containing minor wave 5 (pink lines).

Minuette wave (ii) may not move beyond the start of minuette wave (i). This wave count is invalidated with movement above 1,573.66.