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S&P 500 Gets Close To Upside Target Of 4750-4800. What’s Next?

By Dr. Arnout ter Schure Stock MarketsNov 24, 2021 03:20PM ET
www.investing.com/analysis/sp-500-gets-close-to-upside-target-of-47504800-whats-next-200609464
S&P 500 Gets Close To Upside Target Of 4750-4800. What’s Next?
By Dr. Arnout ter Schure   |  Nov 24, 2021 03:20PM ET
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Two weeks ago, see here, using the Elliott Wave Principle (EWP) and technical analysis, I said:

“If the SPX can hold 4565, it should be able to move higher to ideally 4750-4800, baring any 5th wave extensions.

The index and my EWP-based analyses did not disappoint, as the S&P 500 reached SPX 4744 on Monday and reversed hard. Close enough to SPX 4750, since I was only off by 0.1%? Possibly, now the question is: "Did the index top and is now embarking on a 10-15% correction? Or, can it squeeze out one more rally deeper into the ideal target zone?” This question is akin to my recent analyses on the Nasdaq 100 (see here).

Figure 1. S&P 500 daily chart with detailed EWP count and technical indicators

S&P 500 Daily Chart.
S&P 500 Daily Chart.

Figure 1 above shows the two options, highlighted by the black square, which is the area of focus of this article. Either yesterday’s low was the end of a complex wave-4 (grey a,b,c letters) correction or the start of a trend change, i.e., a more extensive correction. Flats in a bull market comprise three waves down, three waves back up, followed by five waves down. The latter shows nice for the NASDAQ (see my recent tweet here). Because this is possibly an irregular flat, where the three waves back up made a new all-time high, it is, therefore, a possible ATH – the top of (green) minor-5 of (red) intermediate-iii of (black) major-3. Subsequently, the five waves decline was the start of a more extensive correction.

Now, the market will have to thread through a needle. We should know soon enough. Please be aware that baring any unforeseen extensions of the possible final 5th wave, the upside potential is ideally around 120p on the SPX, while the downside risk is now potentially 300p. How do we know? A drop below the Nov. 10 low of SPX 4630 without making a new ATH will be an excellent signal that SPX4350+/-50 is, at some point, most likely next. On the other hand, a rally back above SPX 4725 will be a perfect signal that SPX 4800+ is next (green dotted arrow).

Lastly, please note the red dotted arrows on the technical indicators on the chart for the current period and back in April-May. Back then, the index also went through a small 4th and 5th wave setup (grey box). Indeed, the (orange) micro-4 wave was also an irregular flat (blue a, b, c). Besides, once the (grey) minute wave-iii completed, the swift, ~5%, minute-iv correction transpired in early May. Thus, with the similar setup in the technical indicators and a possibly similar type of 4th wave complete, albeit one degree higher than in the spring, odds favor higher prices followed by a more significant correction. But only as long as SPX 4630 holds.

Bottom line: The S&P 500 held 4565 and, therefore, moved higher to almost the ideal SPX 4750-4800 target zone as forecasted. Thus, the index has reached another crossroads. It can start its 10-15% correction now or try for one last rally to SPX 4800+ first. Analyses of prior similar setups during this rally suggest the latter. Besides, as I always say, “in bull markets, upside surprises and downside disappoints.” Thus, as long as SPX 4630 holds and the bulls can rally price above SPX 4725, I will look for one last rally. By then, I expect enough negative divergences on the technical indicators to help usher in the next correction similarly to what was seen in early May, but likely two to three times as severe.

S&P 500 Gets Close To Upside Target Of 4750-4800. What’s Next?
 

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S&P 500 Gets Close To Upside Target Of 4750-4800. What’s Next?

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Comments (6)
Xiaoxin Zhan
Xiaoxin Zhan Nov 25, 2021 1:35PM ET
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well I think you be could right till end of 2022 or early 2023 when it reaches 6000
Dr. Arnout ter Schure
Dr. Arnout ter Schure Nov 25, 2021 1:35PM ET
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Yup. That is the target and time frame. After that… prepare for war…
Foxy Methoxy
Foxy Methoxy Nov 25, 2021 1:37AM ET
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We tend to remember successes more than failures. It is the nature of our psychology- most people are optimists, unless they have severe depression (like myself). Even if you tend to be passive or technical, iit is still 'optimistic'. My pessimism has generally failed me; because rather than remembering the successes (such as getting within 0.1% on a prediction) I remember all the failures vividly.  Technicals can work but market psychology and mean reversion > technicals, because those are things that cannot be elaborated upon in a future manner; one is relative, and the other is objective.  Based on just history, it is almost always, with the exception (not even really) in favor of the bulls. The bears are temporary in success and it is always short lived, whether short means a week or a couple years. Invariably, as we see where we are right now, even huge events cannot stop the bulls. Optimism wins out because most of the population has it.  It's never different this time
Dr. Arnout ter Schure
Dr. Arnout ter Schure Nov 25, 2021 1:37AM ET
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Thanks for sharing your personal journey and insights. Much appreciated.
Flo Seifer
Flo Seifer Nov 25, 2021 1:11AM ET
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Thx for this analysis. Is there any chance you can indicate potential retracement targets you mentioned please? That would help visualize this potential correction you talk about. Thx a lot
Dr. Arnout ter Schure
Dr. Arnout ter Schure Nov 25, 2021 1:11AM ET
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When we get resolution i will.
apostolos sideris
apostolos sideris Nov 24, 2021 11:11PM ET
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simple and clear.thank you.
Aaron Pierett
Aaron Pierett Nov 24, 2021 8:27PM ET
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what indicators are you using derive your opinion? currently, spx is maxed on fib extension
Kool Aid
Kool Aid Nov 24, 2021 4:44PM ET
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Thanks as always for the analysis doc!  Pretty wild the similarities on the technical indicators between now and Apr.   Watching closely...
Dr. Arnout ter Schure
Dr. Arnout ter Schure Nov 24, 2021 4:44PM ET
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Thank you. Marjets are threading the needle here…
 
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