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Upwards movement was expected from yesterday’s Elliott wave analysis. The wave count remains the same.

Summary: The target at 2,010 may be met in about two weeks time. Upwards movement should continue from here.

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

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.

Within subminuette wave v no second wave correction may move beyond its start below 1,955.59.

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 70 days. The next Fibonacci relationship could see it end in a total 89 days, which now is in 19 days time. However, at this stage I expect that minuette wave (iii) may not exhibit a Fibonacci duration as the target looks like it would be met sooner.

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.

S&P 500 hourly 2014

This main hourly wave count agrees with MACD: submicro wave (3) exhibits strongest upwards momentum and within it minuscule wave 3 end corresponds with the strongest histogram reading.

At 2,005 micro wave 3 would reach 1.618 the length of micro wave 1.

Within micro wave 3 submicro wave (3) has no Fibonacci ratio to submicro wave (1).

Ratios within submicro wave (3) are: minuscule wave 3 has no Fibonacci ratio to minuscule wave 1, and minuscule wave 5 is just 0.01 longer than 0.618 the length of minuscule wave 3.

Submicro wave (4) looks like an incomplete zigzag. At 1,984.27 minuscule wave C within it would reach equality in length with minuscule wave A. This may bring submicro wave (4) outside of the best fit channel I have drawn about this upwards movement.

Submicro wave (4) may not move into submicro wave (1) price territory below 1,971.14.

S&P 500 5 minute 2014

Alternate Hourly Wave Count

S&P 500 hourly alternate 2014

There is now a complete five wave structure upwards. However, if this wave count is correct and we were to see a red candlestick tomorrow for a second wave correction then the first wave up would not have a very good look on the daily chart. For that reason I expect this alternate has a low probability, maybe as low as 20 – 30%.

This wave count does not agree with MACD: within the third wave, the middle third wave of minuscule wave 3 does not correspond to the strongest histogram reading and the strongest reading there is minuscule wave 5 of submicro wave (3).

This wave count is however possible. If we see downwards movement develop a red candlestick tomorrow then this is the wave count I would use. Micro wave 2 may end about the 0.618 Fibonacci ratio of micro wave 1 at 1,968.37.

Micro wave 2 may not move beyond the start of micro wave 1 below 1,955.59.

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 (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 04:50 p.m. EST.