The S&P 500 has been making hard work of maintaining its uptrend since the last significant correction occurred into last August’s low of 2415.75 (futures). Since then, a five wave impulse pattern has pushed markets up by +7.3% per cent, impressive, but the momentum is now waning.

The impulse pattern began by unfolding into a series of 1-2’s, a step-like sequence of advances and declines of similar amplitude which are simply the fractal subdivisions of the up-coming 3rd wave. After three 1-2 sequences, ‘price-expansion’ occurred from the late-September low of 2485.00 which acts as the 3rd-of-3rd-of-3rd wave sequence within the pattern. The reason why the S&P is now making hard work of maintaining the same velocity is because, since early-October, it is engaged in a corresponding series of 4-5’s which are approaching upside completion that ends the entire impulse from August’s low.

Elliott Wave Pattern - The Double Diagonal

If we zoom-in to the final stage of the 4-5-4-5 sequences, we can see something a little unusual – see fig #1. The last two impulse advances as 5th waves can be seen taking the form of an ending/contracting diagonal pattern. The first of the diagonals acts as the fifth wave within the larger 3rd within August’s impulse advance. Note that extending wave 1 to 2580.75 projects the peak of wave 5 in close proximity to the final high of 2594.50.

This was followed by a three wave correction to 2555.50, ending the larger 4th wave within August’s impulse advance.

SP500

The following advance has also the initial hallmarks of unfolding into a diagonal too. The push higher from 2555.50 to 2589.50 has definitively unfolded into a three wave sequence, not a five. Had it been a five, this would have resulted in the advance proceeding as an ‘expanding-impulse’, but as a three wave sequence, this fits the profile of an ending/diagonal, because the impulse sequences, i.e. 1-3-5 are expected to subdivide into zig zags (or multiples, doubles/triples).

The 2589.50 high is labelled as ending the first wave, wave < 1 > within the ending/diagonal, wave < 2 > has since pulled lower to 2567.75. But wave < 3 > is now engaged to the upside – this must also subdivide into a zig zag (as illustrated) or perhaps a double/triple sequence.

Fibonacci Ratios

Wave < 3 > is commonly slightly larger than wave < 1 >, so we’ve used a subliminal fib. 109.01% ratio that measures its high towards 2605.00+/-. Wave < 4 > then pulls back towards the fib. 50% retracement area at 2586.50+/- which is enough to cause the necessary ‘overlap’ of wave < 1 >. And finally, wave < 5 > to upside targets towards 2609.25+/- where this unfolds by a fib. 61.8% ratio of wave < 3 >.

Observing back-to-back diagonals is something interesting to watch – this doesn’t happen often, and predicting a second is somewhat speculative but definitely worth exploring.    

 


 

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WaveTrack International and its related publications apply R.N.Elliott's "The Wave Principle" to historical market price activity which categorises and interprets the progress of future price patterns according to this methodology. Whilst it may be reasonable to deduce a course of action regarding investments as a result of such application, at no time or on any occasion will specific securities, futures, options or commodities of any kind be recommended for purchase or sale. Publications containing forecasts are therefore intended for information purposes only. Any opinion contained in these reports is only a statement of our views and are based on information we believe to be reliable but no guarantee is given as to its accuracy or completeness. Markets are volatile and therefore subject to rapid an unexpected price changes. Any person relying on information contained in these reports does so at their own risk entirely and no liability is accepted by WaveTrack in respect thereof. © All rights are copyrights to WaveTrack. Reproduction and / or dissemination without WaveTrack's prior consent is strictly forbidden. We encourage reviews, quotation and reference but request that full credit is given.

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