Last analysis had just one wave count which expected more upwards movement. The hourly wave count has been invalidated with movement below 1,573.66. The daily wave count remains valid.

I have two new wave counts for you today. We should always assume the trend remains the same, until proven otherwise. For this reason my main wave count will expect the trend to continue because we have no confirmation of a trend change.

Click on the charts below to enlarge.

Main Wave Count.

I have considered various possibilities for labeling of intermediate wave (C). If the trend is not over and we are yet to see new highs then this wave count has the best fit. However, it does not agree nicely with MACD as an indicator of momentum. The strongest piece of upwards movement is labeled as minuette wave (i) within the middle of the third wave, and this movement is more likely to be a third wave not a first.

This is my main wave count because we should always assume the trend remains the same, until proven otherwise. We do not have confirmation of a trend change so we should assume we shall see more upwards movement.

There is no Fibonacci ratio between minor waves 3 and 1. This makes it more likely we shall see a Fibonacci ratio between minor wave 5 and either of 3 or 1. When minor wave 4 is complete a target for upwards movement to end may be calculated at minor wave degree. It would be most likely that minor wave 5 would be 66 points in length to be equal to minor wave 1.

Ratios within minor wave 3 are: minute wave iii is 11.74 points longer than 2.618 the length of minute wave i, and minute wave v is just 4.72 points short of equality with minute wave i.

Ratios within minute wave iii are: minuette wave (iii) is 3.48 points short of 0.618 the length of minuette wave (i), and minuette wave (v) has no Fibonacci ratio to minuette waves (i) or (iii).

The channel drawn here is a conservative best fit. Draw the first trend line from the highs of minor waves 1 to 3 and push it upwards to enclose all upwards movement. Place a parallel copy upon the low of minute wave ii within minor wave 3. Minor wave 4 should find some support about the lower edge of this channel.

At this early stage we may expect minor wave 4 is incomplete and may end about the fourth wave of one lesser degree; minute wave iv ended at 1,539.5.

Minor wave 2 was a shallow (36%) zigzag correction. Minor wave 4 would most likely be a flat and may or may not exhibit alternation in depth.

Minor wave 4 may not move into minor wave 1 price territory. This wave count is invalidated with movement below 1,538.57.

So far to the downside we have a three wave structure. This may be minute wave a within minor wave 4 if a flat is unfolding. At this stage on the five minute chart it looks most like minute wave a should move a little lower tomorrow. At 1,543 minuette wave (c) would reach 2.618 the length of minuette wave (a).

If minor wave 4 unfolds as a flat correction then minute wave b within it must be at least 90% the length of minute wave a. When minute wave a is complete we may calculate a minimum target upwards for minute wave b. Minute wave b would be reasonably likely to make a new high above the start of minute wave a as in an expanded flat correction.

Alternately minor wave 4 may unfold as a double combination or double zigzag correction with the first structure a zigzag. We would still expect downwards movement to a short term target at 1,543 before a three wave structure upwards. Within doubles there is no minimum length for X waves and they also may make new price extremes beyond the start of the first corrective structure, so a new high would also be possible.

Alternate Wave Count.

It is again possible that we have seen a trend change, but at this early stage we have no confirmation. Monday’s strong downwards day over 36 points is the strongest downwards day we have had since November last year.

There is no candlestick reversal pattern here.

This wave count agrees with MACD as an indicator of momentum. The strongest piece of movement is minuette wave (iii) within minute wave iii within minor wave 3, the very middle of the third wave.

Intermediate wave (C) would be just 9.15 points longer than 0.618 the length of intermediate wave (A).

Ratios within intermediate wave (C) are: minor wave 3 is 15.94 points longer than 2.618 the length of minor wave 1, and minor wave 5 has no Fibonacci ratio to either of minor waves 1 or 3.

Ratios within minor wave 3 are: minute wave iii has no Fibonacci ratio to minute wave i, and minute wave v is 6.56 points longer than 0.618 the length of minute wave iii.

Ratios within minute wave iii of minor wave 3 are: minuette wave (iii) has no Fibonacci ratio to minuette wave (i), and minuette wave (v) is 2.87 points short of 0.618 the length of minuette wave (iii).

Ratios within minute wave v of minor wave 3 are: minuette wave (iii) is 3.11 points short of 1.618 the length of minuette wave (i), and minuette wave (v) is 3.31 points short of 0.618 the length of minuette wave (iii).

The channel drawn here is a conservative bet fit. Draw the first trend line from the low of minute wave ii within minor wave 3 to the low of minor wave 4, then place a parallel copy on the high of minute wave i within minor wave 3. This channel contains all movement so far. We may see price find some support about the lower trend line before downwards movement breaks through.

For this alternate wave count to have initial confirmation we would need to see a full daily candlestick below the channel and not touching the lower trend line. At that stage I would switch wave counts over and this would be my main wave count. Until we have confirmation this wave count should be considered as a possibility but may not be relied upon.

Final confirmation would come with invalidation of the main wave count with price movement below 1,409.16. At that stage we may have confidence that the S&P 500 should be in a new downwards trend to last one to several years and take price substantially below 666.76.

At this stage we do not have a clear five down on the hourly chart which is another reason for caution with this wave count.

So far we have a three down. A-B-C and 1-2-3 have the same subdivisions. For this alternate wave count so far we may have an incomplete 1-2-3.

At 1,543 minuette wave (iii) would reach 2.618 the length of minuette wave (i). This may bring price to find support at the lower edge of the parallel channel which was drawn on the daily chart and copied over to the hourly chart. It may be at that stage that a fourth wave correction is initiated.

Minuette wave (iv) may not move into minuette wave (i) price territory. This wave count is invalidated with movement above 1,579.97.

If this wave count is invalidated with upwards movement there would be another structural possibility for a new downwards trend. We may be seeing a leading diagonal unfolding where the first wave was a zigzag. However, this has a lower probability than an impulse.