S&P 500 extends irregular B‑wave rally toward key 7120

In our previous update from April 1 about the SP500, we concluded based on the Elliott wave, market breadth, and seasonality that “the [wave] W-b rebound into the April 18-28 time frame is now underway.”

Back then, we identified the common target, based on typical Fibonacci retracements of the prior decline (Wave-a) at 61.8-76.4%, along with prior support and resistance levels, as $6800-6900. However, this was exceeded this week, and it’s crucial to recognize that the SP500’s behavior aligns with historical patterns seen during irregular B-waves. The sharp move above the retracement zone, combined with new all-time highs and the $7120 level as we approach the mid-term election year's average turn date on approximately April 18, now requires extra attention. Notably, the current stock market has adhered to this pattern 75% of the time. See figure 1 below.

Figure 1. Mid-term election year seasonality

Past instances in 2011, 2018, and 2020, which were also irregular flat 4th waves, illustrate how these B-waves often compensate for missed targets in the preceding third wave, resulting in a pronounced push before a potential reversal. In this case, the $7120 level is the 138.2% extension of Wave-1 (the rally from the 2020 low to the 2021 high), measured from the 2022 low (W-2), a common target for the 3rd wave. It was missed in January by about 120p (7002 vs 7120). Fast-forward to today, and the index has reached and exceeded it. See Figure 2 below.

Figure 2. Intermediate-term Elliott Wave count with technical indicators for the SP500

Therefore, we could count the March low as a 4^th wave, with a 5^th wave underway, as indicated by the green “alt: 4, alt: 5” labels. Also, the 5th wave, like a B-wave, is a terminal wave.

As such, traders and investors should remain attentive, especially given the confluence of the Elliott wave with seasonality, which has been 75% reliable this year. As April 18 approaches, we continue to monitor for signs of exhaustion and/or a reversal among our premium members, as we did at the end of March, as that will be essential for managing risk and capitalizing on potential trend shifts.