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Price remains above the invalidation point and within the small channel on the hourly chart.

Summary: Upwards movement is incomplete. The target is at 1,939 to 1,940 and this is now one to four more days away. Upwards movement is most likely to end when the upper i-iii pink trend line is slightly overshot.

This analysis is published about 09:12 p.m. EST. Click on charts to enlarge.

The aqua blue trend lines are critical. Draw the first trend line from the low of 1,158.66 on 25th November, 2011 to the next swing low at 1,266.74 on 4th June, 2012. Create a parallel copy and place it on the low at 1,560.33 on 24th June, 2013. While price remains above the lower of these two aqua blue trend lines we must assume the trend remains upwards. This is the main reason for the bullish wave count being my main wave count.

Bullish Wave Count.

S&P 500 daily 2014

This bullish wave count expects a cycle degree correction was over at 666.79 for a fourth wave, and a new cycle degree bull market began there for a fifth wave. Within cycle wave V primary waves 1 and 2 are complete. Within primary wave 3 intermediate wave (1) is almost complete.

Minor wave 5 is an almost complete ending contracting diagonal. Within an ending diagonal all the subwaves must be single zigzags, and the fourth wave should overlap first wave price territory.

Within the final fifth wave of this diagonal minuette wave (b) is a running contracting triangle. Minuette wave (c) is an incomplete impulse.

I would expect the final fifth wave of this diagonal to end at the upper i-iii trend line, or maybe to overshoot this trend line.

The diagonal is contracting because minute wave iii is shorter than minute wave i. Minute wave v may not be longer than equality with minute wave iii at 1,973.72 because a third wave may never be the shortest wave.

At 1,939 minuette wave (c) would reach equality with minuette wave (a). Minuette wave (c) has now lasted nine days and has not reached the pink i-iii trend line of the diagonal. If it continues for another four more days it may take a total Fibonacci 13.

There is persistent divergence with price trending higher and MACD trending lower. This classic technical divergence supports this wave count and indicates that at least a reasonably sized correction should arrive soon.

S&P 500 hourly 2014

The pink trend line is still not met so I will expect that minuette wave (c) is not over.

At 1,940 subminuette wave v would reach equality in length with subminuette wave iii. Because there is no Fibonacci ratio between subminuette waves iii and i it is more likely we shall see a Fibonacci ratio for subminuette wave v to either of iii or i.

Momentum continues to slow and there is divergence at the hourly chart level as well as the daily chart level. This indicates that upwards movement is near its end.

I have drawn a small channel about subminuette wave v using Elliott’s second technique: draw the first trend line from the ends of micro waves 2 to 4, then place a parallel copy upon the end of micro wave 3. So far further upwards movement remains nicely contained within this small channel. It should continue to be so as upwards movement comes to a slow end. When this channel is strongly breached to the downside that would be the earliest indication of a possible trend change.

Within micro wave 5 no second wave correction may move beyond the start of its first wave below 1,915.18.

S&P 500 5 minute 2014

Bearish Alternate Wave Count.

S&P 500 daily bear 2014

This bearish alternate wave count expects that the correction is not over. The flat correction which ended at 666.79 was only cycle wave a of a larger super cycle second wave correction.

Cycle wave b is now longer than the maximum common length of 138% for a B wave of a flat correction.

Cycle wave b is an almost complete zigzag structure.

A clear breach of the large maroon – – – channel on the monthly and weekly charts is required for confirmation of this wave count. If that happens then this would be my main wave count and would be strongly favoured. Only once this wave count is confirmed will I calculate downwards targets for cycle wave c for you; it would be premature to do that prior to confirmation.