|

SP500 Elliott Wave update: The rally to 7120 continues

We have been monitoring the SP500 (SPX) to reach approximately 7120 in an Elliott Wave (EW) Principle impulse (five-wave) move upward from the early April lows for a more significant top for many months. Within this uptrend, we have recently been tracking a minor 4th wave correction since early November, which we found to have ended late November:

…Therefore, November 12 was the Wave b of Wave 4, and last Friday ended the W-c of the (green) W-4 correction. Additionally, the correction this month best qualifies as a (double) zigzag, while the April 10-21 correction best qualifies as a flat, which meets the EW’s “rule of alternation”. Thus, contingent on the SPX holding above last Friday’s low at 6521, with a serious warning for the Bulls below 6630 (Monday’s low), we can allow for the index to rally to 7120+.

Fast forward to today, the index stayed above 6630 and is up 125 points (1.8%). See Figure 1 below. It should complete a 4th-wave pullback before the rally continues. See Figure 1 below.

Figure 1. Short-term Elliott Wave count for the SPX since October

In a textbook five-wave impulse pattern, the third wave usually reaches the 161.8% extension, the fourth wave hits the 100.0%, and the fifth wave extends to 200.0%. This would translate to roughly 6852 for the orange W-3, 6800 for the W-4, and 6897 for the W-5. In reality, the index peaked at 6850, dipped to 6780, and today reached 6895. Thus, the EW predicted these moves with remarkable accuracy (+/- 0.03-0.3%).

What does this mean moving forward? Unless there are unexpected extensions of the current (orange) W-5, we anticipate a slight pullback in the gray 4th wave to around 6785-6825 before the next upward move (gray W-v) begins. The latter could then ideally reach 6930-7010. Note that, like the orange W-4, pullbacks in an uptrend tend to be shallow because “in bull markets the upside surprises and the downside disappoints.” If that is the case, the fifth wave will go higher as well. Regardless, this ideal upside target zone is already closer to the 7120 level we’ve been eyeing, from where the chances of a prolonged move down to 5800+/-400 increase significantly.

The short-term warning levels for the Bulls are set at 6827, 6800, 6738, 6660, and 6597. Each time these levels are broken, the chances of a continued uptrend drop by 20%.

Author

Dr. Arnout Ter Schure

Dr. Arnout Ter Schure

Intelligent Investing, LLC

After having worked for over ten years within the field of energy and the environment, Dr.

More from Dr. Arnout Ter Schure
Share:

Editor's Picks

EUR/USD pops to yearly highs near 1.1770

EUR/USD rapidly reverses course and hits fresh YTD tops near 1.1780 at the end of the week. The pair’s U-turn comes on the back of the intense sell-off in the Greenback amid the generalised risk-on context.

GBP/USD climbs to four-month tops near 1.3600

GBP/USD is building on its solid weekly advance and is pushing toward the 1.3600 hurdle on Friday, or new four-month peaks. Cable’s strong move higher comes as the Greenback intensifies its decline, while auspicious results on the UK calendar also collaborate with the uptrend.

Gold picks up pace, approaches $5,000

Gold prices keep their uptrend well in place and gear up for an imminent hit to the key $5,000 mark per troy ounce on Friday. The yellow metal’s sharp advance gathers pace amid the increasing weakness in the US Dollar and mixed US Treasury yields across the curve.

Swiss bank UBS Group mulls Bitcoin and Ethereum offering for select private clients

UBS Group AG plans to offer crypto investment services to select private clients. The offering will allow clients of its private bank in Switzerland to buy and sell Bitcoin and Ethereum.

Week ahead – Fed and BoC meet amid geopolitical upheaval and Trump’s Fed pick

Fed to likely go on pause after three straight cuts. BoC is also expected to stand pat. But will Trump steal the limelight by revealing his Fed chair nomination?

Bitcoin slips below $90,000 as Trump's tariffs swing, ETF outflows pressure price

Bitcoin price struggles below $90,000 on Friday, correcting nearly 5% so far this week. Trump’s Davos speech on Wednesday, backing away from imposing further tariffs on the EU, triggered market volatility and risk-on mood.