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Can S&P 500 Reach 5000+ Amid Bear Market? 

Published 06/17/2022, 01:44 PM
Updated 07/09/2023, 06:31 AM

You must think I am crazy even asking this question because prices are supposedly only going down in a bear market. But allow me to explain:

In my article about the Dow Jones Industrial Average posted yesterday, I showed the possibility that the index is already in a multi-year bear market.

The same applies to the S&P 500 (SPX), and the same crucial question is: how will this multi-year bear market unfold?

Namely, looking forward to and anticipating the next few months and years matters for traders and investors. Or, as they say, forewarned is forearmed.

One of the best ways and tools to do that is by assessing the past and applying the Elliott Wave Principle (EWP). I will determine the SPX’s big-picture EWP count in this article using price data since the 1920s. Note that the S&P 500’s inception occurred in 1957, and it was the S&P 90 before that. I will apply the EWP’s rules, patterns, and past corrections to anticipate how this potential current bear market may unfold logically.

S&P 500 Monthly Chart With Detailed EWP Count

If Super Cycle III topped, how could Super Cycle IV develop?

Before I try to answer that question, I need to establish the big-picture EWP count to help me determine SC-IV’s potential future progress. The infamous 1929 top and subsequent crash into the 1932 low are by most ellioticians regarded as Super Cycle-I and II, respectively. See figure 1 above. In more detail, SC-II was a zig-zag. The subsequent five waves rally into the 1937 high was the one degree lower Cycle-1 wave. C2 bottomed in 1942 and was also a zig-zag. (Blue) Primary-I topped in 1946 (yes, the market rallied >100% during World War II, as it already sniffed out Germany would lose, aka the Markets are forward-looking), and P-II was another zig-zag. We can see An impulsive advance into the 1968 high from that low. Then the index went through a six-year-long sideways consolidation. In EWP terms called an irregular, expanded flat wave (IV). Flat corrections consist of three waves: A-B-C. The internal structure of each wave is 3-3-5. In Bull markets, the B-wave of an irregular flat makes a new ATH.

From the EWP, we know that in an impulse, five comes after four, and the market embarked on P-V, which topped in 2000 to complete C3. Another almost decade-long sideways consolidation happened: Cycle 4. This wave was also an irregular expanded flat, with the 2007 ATH the B-wave top. Cycle-4 bottomed in March 2009, and since then, we have come to enjoy C5 of SC-III. The index went through two more flat 4th waves between then and now. The smaller one (2015-2016) was a regular flat, whereas the larger one (2018-2020) was -once again- an irregular expanded flat. The COVID crash was the C-wave of that flat. The subsequent rally from the March 2020 low was Primary-V of Cycle-5 of Super Cycle-III. The latter may now have topped, meaning Super Cycle-IV is underway.

Given the rule of alternation in the EWP:

if Wave 2 unfolds as a simple ABC correction, probabilities favor Wave 4 is more likely to unfold as a complex correction. And vice-versa, if Wave 2 is complex, Wave 4 will likely unfold as a simple ABC pattern.

In this case, I established all the 2nd waves (SC-II, C-2, P-II) were simple zig-zags and all fourth waves (P-IV, C-4, M-4, P-IV) were complex flat corrections. Thus based on this pattern, it is logical to assume the current SC-IV wave will also be complex: a flat.

At this stage, one cannot know if SC-IV will become an irregular expanded flat, meaning wave-B of IV will make a new ATH or only a regular flat (A=B=C). However, based on the historical evidence, it will likely become irregular and expand flat. The B-wave can reach as high as SPX5000-5500 and satisfy my long-standing call for this price level.

if the 3rd wave doesn’t reach the ideal upside target, the B-wave will do the trick.”

Besides, if SC-IV follows the prior 4th waves paths, I expect SC-IV to ideally bottom between $2420-1850. Based on the timeline of these previous 4th waves, I expect SC-IV to last potentially up to a decade.

In more detail, wave-A of SC-IV has then just gotten started, and the first leg lower (wave-a of A) should wrap up soon, to be followed by a multi-month relieve rally/dead cat bounce (wave-b of A) before the next leg lower starts (wave-c of A).

Once wave-A completes, wave-B can reach as high as SPX5000-5500, as shown in the above chart, but it will take much longer than originally anticipated.

Latest comments

he tries pumping so hard
The indexes are getting lower than pre-pandemic levels . Actually if there was no pandemic in two years , indexes were going to be a little higher than present level . After subtract Ukrainian war and with gradually decreasing effects of pandemic US economy looks healthy and gradual increase should be expected , i think .
Market always tells you what you SHOULD'V'E done. 5000? Not this year. But probably eventually. History shows you that. Nibble when we have corrections.
This guy is really a genius Biden. I mean just genius. Look at the work he has done. I don't know from where he gets that intelligence
Dr. Arnout ter Schure, Please keep doing your wonderful posts. Your Numbers Always confirm mine, though, I used a Totally differenct way/system/formula of my own.
What do the charts tell you about the Fed tightening and lower earnings?
only if Bitcoin gets back to 60k. doubtful.
I got sea sick....what genius
so 5000 by the end of 2029?
I haven't seen anything so stupid than they imposed lockdown.
I think his name should be Dr. I'mnot to Sure.
This guy is funny ( i heard 6000 by end of year yesterday! ) people are desperate to believe ! Truth is , absent of QE , markets /all assets , will continue to slide 70-95 percent!
I would gather all these analysts and predictors and send them to some nice Russian camp. Rivien 140$ , Amazon 5000$. Name it. Make people beleive that they know sonetging …Powell , Yellen they. can go to. They useless.If next month CPI comes big again, expect another sell off, and keep going unless its turns over and the FED stops with the rates.When they tell you it will be a slowdown theen you know what's on the way, not a slowdown. It will be a tsunami. Businesses need money to grow. Who will borrow money on 8-10% interest? So don't expect the SP 5000 years to come. 5? 10?
Fed still adding to the balance sheet as crumbs come rolling in from leftover treasuries
Another Jim Cramer!  Please keep going!  In the meantime, I will keep shorting the market and make money.
So you think it goes to 5500 eventually then down to 1850 in 10 years or so? Is this your rationalization of why your predictions have been wrong the last few months? I have been reading you for months and I think you were right on about the coming rally. There is a huge disconnect between sentiment and economic reality. Sentiment is lower now then it was when unemployment was at 10%. The Fed will pivot when they find out people hate losing their retirement money worse then inflation. keep it up but this one is a stretch.
Now you think we are in a multi year bear market? First of all you have a PHD you should know that charts can't "predict" multi year anything. The future hasn't unfolded and if it did happen it would be a coincidence not a prophecy. 2nd how do we know you won't flip flop next week? I think you were right on sentiment is 100X worse then the strength of the economy.
The guy has a PHD and says that is going to use the Elliott wave principle to anticipate the market logically...
you been calling a bull run for months now based on the Elliott wave principle, but all it done so far is wave you bye bye. I suppose if you keep calling it at some point it will ring true, but then even a broken clock is right twice a day.
You might like the bears who have been calling the top since 2K and are now acting like geniuses?
not exactly but it's been pretty obvious though last year the market was becoming so detached from fundermentals and economic reality due to greed and a deluded wall street who have binged on easy money for years so much so that their ability to read economics has become blurred, a crash was bound to happen.
“ You must think I am crazy even asking this question because prices are supposedly only going down in a bear market.” you should have stopped after this sentence. But since you went on, it makes me question your motives: 1 somebody is paying you to pump, what ever the reality  2 you live in a parallel universe we’re up is down and down is up 3 you just like to put out crazy thoughts and see how much efforts people put in reacting 4 you really believe that stuff  What ever one it is, good luck with that
I think you made a typo. you mean 500 right? Good luck trading the Elliott Wave. This may happen or maybe this could happen . garbage.
it will reach after 10yrs
yep. i think you are crazy. we visit 3200 and sideways 2 years at least. the geo political environment changed
I am very happy to hear from Arnout, no Dr. Arnout. He is a typical PhD hard worker. We must salute him for his resilience. God bless 🤣
Typically the great obsession with new highs is what actually makes new lowe 😂. I am glad to know you are still obsessed. Now we can have new lows in the current bear trends
during world war II, as it already sniffed out Germany, you wrote. The word is snuffed out.
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