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Last analysis expected downwards movement for Friday’s session to a short term target at 1,628. Price moved lower as expected, falling short of the target by just 2.74 points.

The wave count remains the same.

Click on the charts below to enlarge.

S&P 500 daily 2013

Within intermediate wave (C) minor wave 1 was extended.

There is no Fibonacci ratio between minor waves 3 and 1. This means it is highly likely we should see a Fibonacci ratio between minor wave 5 and either of 3 or 1.

Minor wave 3 is shorter than minor wave 1. Minor wave 5 would be limited to no longer than equality with minor wave 3 because a third wave may never be the shortest. If minor wave 4 has ended at 1,630.74 and does not move lower then minor wave 5 is limited to no higher than 1,767.55.

At 1,740 intermediate wave (C) would reach equality with the orthodox length of intermediate wave (A). At 1,728 minor wave 5 would reach 0.382 the length of minor wave 1. I favour the lower end of this target zone because it is calculated at a lower wave degree.

Minor wave 4 may not move into minor wave 1 price territory. This wave count is invalidated with movement below 1,597.35.

Draw the parallel channel about intermediate wave (C) using Elliott’s first technique. Draw the first trend line from the highs of minor waves 1 to 3, then place a parallel copy upon the low of minor wave 2. Expect minor wave 4 to find support at the lower edge of this channel. The following fifth wave may end midway in the channel where it intersects with the upper maroon trend line.

The very wide maroon trend channel shown here is copied over from the monthly chart. We may find this movement ends as it finds resistance at the upper trend line.

S&P 500 hourly 2013

At this stage it is possible that minor wave 4 is over in a Fibonacci 8 days, but there is not enough upwards movement at the end of Friday’s session (there is none) to confirm that the final fifth wave within minuette wave (c) is complete.

Movement above 1,647.62 would indicate that minuette wave (c) should be over as at that stage upwards movement may not be a fourth wave correction within it.

Movement above the green channel containing minute wave y zigzag would provide trend channel confirmation that minute wave y is over and the next wave upwards is underway.

There will exist a slim outlying possibility that minor wave 4 could continue further sideways as a triple. However, the probability is very low for two main reasons: triples are very rare structures, and a further continuation of minor wave 4 would see it much longer in duration than minor wave 2 giving the wave count an odd look.

What does have a higher probability is that minuette wave (c) may be incomplete and it may move a little lower on Monday. If it did I would expect it to move to about 1,628 and find support at the lower end of the green parallel channel about minute wave y. If it were to break through that line of support the next support is at the lower edge of the wider blue channel copied over here from the daily chart.

On the five minute chart the structure of minuette wave (c) can be seen as a complete five wave impulse, although it does look like a three on the hourly chart. Within it subminuette waves ii and iv are out of proportion (not such a problem on the five minute chart) which may give this possible five wave structure a three wave look. It is possible that downwards movement is over if minor wave 4 is to last only a Fibonacci eight days.

Within minute wave y zigzag minuette waves (a) and (c) are just 2.99 off equality.

If minor wave 4 moves any lower on Monday it may not move into minor wave 1 price territory. This wave count is invalidated with movement below 1,597.35.


To end this trading week I have an extra chart for your consideration. Cesar does a lot of work comparing charts of different instruments, and time frames within the same instrument. This chart below is an overlay of the S&P 500 current monthly chart with a similar period from the early 1970’s recession. The foreground is quarterly candlesticks from the 1970’s, the background is the current monthly wave count for the S&P 500.

So far they match up perfectly. If this current pattern continues to follow what happened in the 1970’s then we should be looking out for another big crash, this one to reach lower than the credit crunch. This is exactly what the current main wave count calls for.

S&P 500 1962comparison 2013