S&P500 Elliott Wave: Searching for matching fourth wave
|Executive summary
Bullish trend: SPX continues in the 3rd wave higher.
Potential target: $7,000 using Fibonacci extension and round number resistance.
Wave count: Still no sight of wave 4 decline.
Current Elliott Wave analysis
The SPX chart follows an incomplete Elliott Wave impulse pattern as the market continues its climb in wave ((iii)).
It appears SPX is still working higher in wave (v) of ((iii)). We can feel confident about this wave labeling because within an impulse, waves 2 & 4 are cousin waves. They tend to experience similar depths.
Once SPX bottomed in April, the largest interruption of the rally was wave 2 at 7 days long and about 7% in price.
Since April 21, the next largest decline was 3.5% or about half of the depth of what the market experienced in April. Therefore, we can confidently conclude that the cousin wave to wave ((ii)) has not arrived yet.
With some reverse engineering, we can then conclude that the recent rally is still simply wave ((iii)). When the next decline arrives, anticipate about a 5-8% haircut and we’ll label that as wave ((iv)) so it can match up with wave ((ii)).
How high might the current rally travel?
There is a wave relationship up near $7,000 where wave ((iii)) is a 2.618 Fibonacci extension of wave ((i)). Additionally, there exists round number resistance. Therefore, we are forecasting a wave ((iii)) top within the next 10%.
Once the wave ((iii)) top is in place, then wave ((iv)) likely travels to 6,300-6,650.
Bottom line
SPX remains in a strong bullish uptrend labeled wave ((iii)). The bullish pattern remains incomplete and may carry up to $7,000 with the next decline, wave (iv) anticipated to remain soft at 5-7%.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.