Price remains above the invalidation point on the hourly chart. Downwards movement for Monday’s session was expected for a small second wave correction within the Elliott wave count.

**Summary: I expect overall upwards movement from here towards 2,010. This may be met in another 21 trading days.**

*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.*

There are a couple of things about this wave count of which I am confident. I see minor wave 3 within intermediate wave (1) as over at 1,729.86 (19th September, 2013). It has the strongest upwards momentum and is just 0.76 longer than 2.618 the length of minor wave 1. At 455 days duration this is a remarkably close Fibonacci ratio. The subdivisions within it are perfect. If this is correct then minor wave 4 ends at 1,646.47 and this is where minor wave 5 begins.

Minor wave 5 may be only one of two structures: a simple impulse or an ending diagonal. At this stage an ending diagonal looks very unlikely, minor wave 5 is unfolding as an impulse. If minor wave 5 has passed its middle then I would expect to see more divergence between price and MACD develop over coming weeks.

Along the way up towards the final target I would expect to see two more corrections complete: the next for minuette wave (iv) and the last for minute wave iv.

At this stage I expect that subminuette wave iv is complete. Once this is confirmed with a new high above 1,983.94 I will move the invalidation point on the daily chart up to the beginning of subminuette wave v. While the end of subminuette wave iv is unconfirmed it may continue, and it may not move into subminuette wave i price territory below 1,884.89.

At 2,010 minuette wave (iii) would reach 1.618 the length of minuette wave (i). Within minuette wave (iii) subminuette wave iii is 8.31 points short of 1.618 the length of subminuette wave i, and so I would not expect to see a Fibonacci ratio for subminuettte wave v. I will leave the target calculation at minuette wave degree.

At 2,218 minor wave 5 would reach equality in length with minor wave 3. This target may be met in October.

I have drawn a parallel channel about minuette wave (iii) using Elliott’s first technique: draw the first trend line from the highs of subminuette waves i to iii, then place a parallel copy on the low of subminuette wave ii. Subminuette wave iv may have remained mostly contained within the channel. Subminuette wave v may end about the upper edge of this channel.

Minuette wave (i) lasted 12 days, just one short of a Fibonacci 13. Minuette wave (ii) lasted a Fibonacci 34 days. Minuette wave (iii) so far has lasted 68 days. The next Fibonacci relationship could see it end in a total 89 days, which now is in 21 days time. This would also see minuette waves (i), (ii) and (iii) exhibit Fibonacci ratios to each other, as those ratios are derived by the relationship between Fibonacci numbers.

The large maroon – – – channel is copied over from the weekly chart. It is drawn in exactly the same way on bull and bear wave counts. For the bull wave count this channel is termed a base channel about primary waves 1 and 2. A lower degree second wave should not breach the lower edge of a base channel drawn about a first and second wave one or more degrees higher. The lower maroon – – – trend line differentiates the bull and bear wave counts at cycle degree and monthly chart level.

At the hourly chart level subminuette wave iv now subdivides nicely as a running contracting triangle (the B-D trend line is sloped and not flat enough to term this a barrier triangle).

The upwards trend at subminuette degree would be confirmed with movement above 1,983.94. At that stage the second hourly chart below would be invalidated.

This main wave count has a higher probability because it has a great fit and sees subminuette wave iv at 16 days, almost perfectly in proportion to subminuette wave ii at 17 days. They show great alternation: subminuette wave ii was a shallow 32% combination and subminuette wave iv is a more shallow 12% triangle. The orange channel is showing nicely where price is finding support and resistance.

Micro wave 2, if it is not over here and moves lower, may not move beyond the start of micro wave 1 below 1,955.59. If this first hourly chart is invalidated tomorrow then I would use the alternate hourly wave count below.

*Alternate Hourly Wave Count*

I have learned the hard way to not trust triangles on the S&P. Too many times I have labeled a movement as a complete or unfolding triangle only to have the wave count invalidated. I must consider all possibilities.

This alternate looks at the possibility that the triangle is micro wave B within subminuettte wave iv, and not subminuette wave iv in its entirety.

This alternate has a lower probability than the first hourly chart because here the triangle trend lines do not have as strong a slope; triangle trend lines normally slope more than these lines show.

Subminuette wave iv is still seen as an expanded flat correction: micro wave A subdivides as a three and micro wave B is also a “three” and a 150% correction of micro wave A. At 1,942 micro wave C would reach 2.618 the length of micro wave A.

If submicro wave (E) of the triangle continues further it may not move beyond the end of submicro wave (C) above 1,983.94.

*Bearish Alternate Wave Count*

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 (or w) of a larger super cycle second wave correction.

The structure and subdivisions within primary wave C for the bear wave count are the same as for intermediate wave (1) for the bull wave count. Thus the short to mid term outlook is identical.

The differentiation between the bull and bear wave count is the maroon – – – channel. The bull wave count should see price remain above the lower maroon – – – trend line. The bear wave count requires a clear breach of this trend line. If this trend line is breached by a full weekly candlestick below it and not touching it then this bear wave count would be my main wave count and I would then calculate downwards targets.

We should always assume the trend remains the same until proven otherwise; the trend is your friend. While price remains above the lower maroon – – – trend line I will assume that the S&P 500 remains within a bull market.

*This analysis is published about 08:28 p.m. EST.*