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S&P 500 Update: Bulls Fumbled, Pullback Underway

By Dr. Arnout ter Schure Stock MarketsDec 08, 2022 03:42PM ET
www.investing.com/analysis/sp-500-update-bulls-fumbled-pullback-underway-200633285
S&P 500 Update: Bulls Fumbled, Pullback Underway
By Dr. Arnout ter Schure   |  Dec 08, 2022 03:42PM ET
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In last week's update (see here) I found for the S&P 500 (SPX) using the Elliott Wave Principle (EWP):

"The [recent] sideways price action combined with yesterday's breakout allows for a final push higher to possibly as high as $4200+/-25, before the next larger pullback to ideally $3830+/-80 kicks in. But the Bulls will have to hold $4034 and $3937 for now because, otherwise, the Bears will take the ball and run it down to ideally $3795+/-75."

Thus, my primary expectation for that final push higher was invalidated because the index dropped below $4034 on December 2 and continued to drop below $3097 two days later. As such, the alternative became operable. See Figure 1 below.

S&P 500 1-Hour Chart
S&P 500 1-Hour Chart

The hourly chart above shows the alternative scenario from last week, which is now my primary expectation, in more detail.* The SPX should bottom out soon, or has already bottomed out, for green W-a and should start the countertrend rally/bounce labeled green W-b to ideally $4020+/-20. Corrections always move in three waves; after W-b, the index should produce the next leg lower labeled green W-c. Depending on where exactly the W-b tops and the extension of the W-c, I anticipated a low at ideally $3730-3870. Once more price data becomes available, we can narrow down this target zone.

Once the $3800+/-70 zone is reached, based on seasonality, preferably later next week, we must entertain the notion all of black W-b has already bottomed out. The index will have to move below $3635 (the 76.40% retrace of the October 13 - December 1 rally), with the first warning below $3725, to start to suggest there will not be a more significant C-wave rally to $4300+.

***

* Since financial markets are -like live in general- probabilistic in nature, there's always a chance one's primary expectation is wrong, i.e., when the markets break above or below certain price levels determined by the EWP rules.* Thus, one must always have an alternative expectation available. This approach is no different from placing an actual trade. One has a primary expectation the trade will become profitable. Why else place the trade!? But at the same time, one has a certain price level -the stop loss level- below (or above, in case one is short) the purchase price where one knows the trade is wrong and must be abandoned: the alternative. We also always hope the trade will be profitable, but we know with certainty, not all trades are consistently profitable. Understanding that trading and forecasting the markets using the EWP primary and alternative are the same, one can then use those invalidation levels determined by the EWP as one's stop loss levels for trading. How simple and elegant.

S&P 500 Update: Bulls Fumbled, Pullback Underway
 

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S&P 500 Update: Bulls Fumbled, Pullback Underway

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Comments (13)
Trikorfo Trader
Trikorfo Trader Dec 09, 2022 7:39PM ET
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Thanks for your thoughts Dr Arnout
Dan Kyle
Dan Kyle Dec 09, 2022 8:00AM ET
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thanks for the analysis!
Mr Doodl
Mr Doodl Dec 09, 2022 6:15AM ET
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Most commentators here have no idea about wave analysis or even technical analysis. LoL
Ray Brown
Ray Brown Dec 09, 2022 5:08AM ET
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👌
Cheryl Burnett
Cheryl Burnett Dec 09, 2022 3:48AM ET
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Is the christmasrally forming or is the grinch gonna spoil it this year...lol
Buck Wood
Buck Wood Dec 08, 2022 9:03PM ET
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Sorry, but you're still not correct. I find if I do just the opposite of what you suggest that I am rewarded most of the time. Thanks for your awful analysis as doing exactly what you say not to do is making me rich.
Ron Te
Ron Te Dec 08, 2022 6:49PM ET
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Write the date the article was written in the beginning. “ the index dropped below $4034 on December 2 and continued to drop below $3097 two days later”, really?? I sm not able to zoom up on the charts on iphone.
Robert Bink
Robert Bink Dec 08, 2022 6:49PM ET
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3097 is a typo. Doc means 3937.
Artist Connor
Artist Connor Dec 08, 2022 6:18PM ET
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402 or 390 tomorrow basically
Rushabh Shah
Rushabh Shah Dec 08, 2022 5:48PM ET
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No way man, this market bout to rip to 4500
John Berry
John Berry Dec 08, 2022 3:26PM ET
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Looks pretty strong to me
 
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