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Yesterday’s analysis expected it was highly likely that a small fourth wave correction was finally over, and that price should move higher during Thursday’s session. This is what happened.

The wave counts remain the same. The main and alternate wave counts will not diverge for weeks or months.

Click on the charts below to enlarge.

Main Wave Count.

S&P 500 daily 2013

This wave count has a higher probability than the alternate. Upwards movement over the last 4 1/2 years subdivides best as a zigzag. If something is “off” about the supposed recovery then it must be a B wave because there is plenty that is off in this scenario in terms of social mood.

Downwards corrections may now find support along the upper edge of the big maroon channel from the monthly chart, if the upper trend line is pushed out to encompass all of primary wave A.

Intermediate wave (5) is incomplete, with minor wave 1 completed and minor wave 2 most likely completed.

At 1,826 minor wave 3 would reach 0.618 the length of minor wave 1. Minor wave 1 is extended, so minor waves 3 and 5 may not be.

At 1,821 minute wave v would reach equality in length with minute wave iii.

At 1,864 intermediate wave (5) would reach equality in length with intermediate wave (1). This is the most common ratio between first and fifth waves so this target has a good probability.

Within minor wave 3 minute wave ii may not move beyond the start of minute wave i. This wave count is invalidated with movement below 1,746.20.

S&P 500 hourly 2013

Movement above 1,787.60 added confidence for me that minute wave iv was finally over and minute wave v was underway.

So far within minute wave v minuette waves (i) and (ii) may be complete. At 1,817 minuette wave (iii) would reach 1.618 the length of minuette wave (i). I would expect to see some increase in upwards momentum for Friday as the middle of minuette wave (iii) moves price higher.

When minuette wave (iii) is completed then minuette wave (iv) may not move back into minuette wave (i) price territory. At that stage the invalidation point may move up to the high labeled minuette wave (i) at 1,793.71.

For tomorrow the invalidation point must be at 1,790.60. Within minuette wave (iii) no second wave correction may move beyond the start of its first wave.

I have drawn the parallel channel about minor wave 5 using Elliott’s second technique. Draw the first trend line from the lows of minute waves ii to iv, then place a parallel copy upon the high of minute wave iii. I will expect minute wave v to most likely end mid way within the channel, and slightly less likely to end about the upper edge of the channel. It should find resistance at the upper trend line.

When minor wave 3 can be seen as a completed five wave impulse then subsequent movement below the channel would confirm that minor wave 3 would be over and minor wave 4 would be underway.

I would expect minor wave 3 to most likely end in another two or three sessions.

Alternate Bullish Wave Count.

S&P 500 daily alternate 2013

It is possible that a new cycle degree bull market began at 666.79. So far it is not yet halfway through, and I would expect it to last for a few years (at least five more years and maybe longer).

At some stage then the current upwards impulse, labeled intermediate wave (5) for the main wave count and minor wave 5 for this alternate, will be completed. At that stage both wave counts would expect a trend change. The main wave count would expect a huge cycle degree trend change, and this alternate would expect an intermediate degree trend change. If the downwards movement subdivides as a three and remains within the maroon channel then this alternate would be preferred. If it breaches the channel this alternate would be discarded.

The maroon – – – channel is an acceleration channel drawn about primary waves 1 and 2 on the monthly chart (it is drawn in exactly the same way on the main wave count, but there it is termed a corrective channel). I would not expect intermediate wave (2) to breach this channel because a lower degree (intermediate) wave should not breach an acceleration channel of a higher degree (primary) first and second wave.

The daily chart shows the structure of minor wave 5. It is incomplete. Targets are the same because they are calculated using the same wave lengths as the main wave count. This bullish alternate does not diverge from the main wave count at this stage, and it will not for some weeks to come.