Elliott Wave chart analysis for the SPX500 for 19th January, 2011. Please click on the charts below to enlarge.
Yesterday’s analysis at the hourly chart level indicated downward movement for both the main and alternate wave counts. We have seen some very strong downward movement. However, we still do not have confirmation of a trend change.
On the daily chart we can see a bearish engulfing pattern. The red candlestick of the 19th of January has a body which fully engulfs the prior day’s blue body. This may be an indication of a trend change.
Downward movement has found support about the lower edge of the small parallel channel containing recent upward movement. If we see a full daily candlestick outside the lower edge and not touching this channel we may have further indication of a trend change.
In the short term movement below 1,253.4 would provide confirmation of a trend change.
Only movement below 1,172.6 would confirm an end to primary wave 2 and indicate that primary wave 3 is underway.
This is our alternate degree of labeling. It is possible on a daily chart to see a complete five wave structure for wave C black. This structure is also visible as a five on a weekly chart.
If price moves below 1,172.6 we may consider primary wave 3 is underway because at that stage downward movement may not be a second wave correction within wave 5 blue.
Main Wave Count.
We were expecting downward movement toward 1,276.11 and we got quite a lot of downward movement.
Wave C aqua will reach 0.618 the length of wave A aqua at 1,272.1. This is the target for downward movement to continue. At this stage downward movement is a very clear five wave structure. Therefore, this correction for wave B purple cannot be over here.
Wave B purple may not move beyond the start of wave A purple. Therefore, this wave count is invalidated with movement below 1,261.4.
We may consider movement below 1,253.4 confirmation of a trend change as at that stage downward movement may not be a second wave correction within wave 5 green as wave 2 may not move beyond the start of wave 1.
Alternate Wave Count.
Downward movement has a clean impulsive look so far. If we see a subsequent third, fourth and fifth wave to the downside we will have further indication that we have seen a trend change.
At 1,251.1 wave 3 orange will reach 1.618 the length of wave 1 orange.
When we have a satisfactory impulsive structure complete for wave 3 orange we may expect a fourth wave correction. At that stage we may move the invalidation point down to 1,278.9.