SP500 Elliott Wave: Approaching end of pattern

Executive summary

• Topping trend: SPX is nearing the end of an impulse pattern that would lead to 2-5% decline.
• Potential target: $7,231 – wave ‘v’ is 61.8% the length of wave ‘i’.
• Wave count: Wave ‘v’ of impulse pattern.

SPX continues its rally from the March low. The rally counts best as an impulse pattern and the structure is mature, nearing its end.

Current Elliott Wave analysis

An Elliott wave impulse pattern counts as 5 waves. It appears the rally from March 30 is in the fifth wave of that 5-wave structure. We can estimate a potential reversal point using the Fibonacci extension tool. Wave ‘v’ often has an equal wave length of Fibonacci proportion relationship with wave ‘i’.

The first of those relationships is the 61.8% where wave ‘v’ can be 61.8% the length of wave ‘i’. That wave relationship comes into play near 7,231 for SPX. If SP500 continues climbing, the next wave relationship is the 100% equality measure near 7,344, then the 161.8% level near 7,525.

Assuming a top is reached soon, the decline typically reaches at least at the 38% Fibonacci retracement relationship of the entire impulse pattern. That could signal a decline back to 6,900-7,000, depending on where the top forms.

Bottom line

SPX is in the latter stages of a bullish impulse pattern. We think SPX may carry a little higher to 7,231 and possibly 7,343 and 7,525.

Once the last price of the impulse pattern has printed, then SPX would likely experience a decline to 6,900-7,000.