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S&P500 Update: Did 5th Wave Down Complete Last Week?

Published 10/17/2022, 02:15 PM
Updated 07/09/2023, 06:31 AM

A week and a half ago, using the Elliott Wave Principle, I showed how the S&P 500 was at a crossroads:

The index can now decide if it wants to complete five (5) waves [lower] or only three (3) waves. … The dividing line in the sand remains at the SPX 3886 level (bearish cut-off). Why? Because the fourth wave in an impulse cannot move into the price territory of the first wave. In this case, W-1 is the Sept. 6 low at SPX 3886.75. Thus, if the index’s price moves above that level as we advance without going below last Friday’s low, the path to SPX 4250-4700 opens. Conversely, if the S&P 500 stays below SPX 3886.75 and breaks below last Friday’s low [SPX 3584] (bullish cut-off), then SPX 3230-3335 can be expected.

The index topped that same day at SPX 3807 and dropped to as low as SPX 3491 on hotter-than-expected CPI data last Thursday, only to reverse strongly and close 2.6% higher for the day. Go figure.

Regardless, SPX has now done enough waves to the downside, five, to consider the move from the mid-August high complete and the decline since the Jan. 3 all-time high. See Figure 1 below.

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

S&P 500 Daily Chart.

However, the index did not reach the ideal downside target zone of SPX 3230-3335. The stock market does not owe us anything and, therefore, does not have to follow an ideal Fibonacci-based impulse path to the downside. However, although SPX 3491 vs. SPX 3335 is only off by 4.6%, considering green W-4 topped a mere 0.6% above the ideal target zone, I expect the index to do better than that.

Thus, I must consider the possibility the index is still working on that green W-4. See Figure 2 below.

In this case, the Sept. 30 low at SPX 3584 was not grey W-v of green W-3, as initially thought, but it was orange W-b of an expanded irregular flat grey W-iv. An irregular flat consists of three waves, a-b-c, and in this case, W-b goes beyond the start of W-a. As such, the W-b can easily be interpreted as a fifth wave.

Figure 2. S&P 500 daily chart with detailed EWP count and several technical indicators:

S&P 500 Daily Chart.

Besides, at last Friday’s SPX 3491 low, the index bottomed much better in the ideal green W-3 target zone (SPX 3414-3515) and is now back again in the W-4 target zone. Moreover, this EWP count also follows the ideal Fibonacci-based impulse pattern more closely, similar to the NASDAQ 100.

As such, SPX 3886.75 remains the dividing line. If the S&P 500 manages to rally above that level without dropping below last week’s low first, then the index completed five waves lower from the mid-August high. We then must content ourselves with a slightly unorthodox impulse wave, but as said, “the markets do not owe us anything.” I will then look for a multi-month rally to the SPX 4350-4650 target zone.

Conversely, a drop below SPX 3491 tells me that the last fifth wave to ideally SPX 3240-3345 has commenced following an ideal Fibonacci-based impulse pattern. From there, the anticipated multi-month rally can then start.

Latest comments

There is nothing of value here. Just flip flopping, goal post moving and wishy wash have it both way predictions. If you use any of this advice, seek help immediately
And what do you suggest we use instead? Don't just spew your misinformed critique and hatred, but also provide the reader with a better alternative. Be constructive, not destructive. Will wait eagerly for your better solutions.
By the wave Avi Gilburt is another EW theorist and has been incredibly inaccurate since late 2021. Continues to change the goal posts every article. If you have to move the posts then it might just be that tje theory isnt credible?
Avi has been incredibly accurate for many, many years. He is one of the best EWers out there. Nobody is perfect and nobody gets it right all the time. This year has not been one of his best. So what? Even a sportsman on her/his way to becoming a world champion loses a few games during a season but is still ultimately crowned the champion. There's nothing wrong with the EWP, it is simply the interpretation of the price action by the EWer that can be wrong.  Especially this year the market has been difficult to read. It happens. I've seen some really good EWers on Twitter this year, but who were wrong for many previous years in a row. Does that now mean they are better than Avi? Avi will get back in the saddle, he will not stay wrong for long. Thus, do not dismiss and critique what one does not understand (well), but learn and study it. Nobody is moving any goalposts. It is the classic response of those who do not understand the EWP and how the markets work.
If we get anywhere close to spx 388 in this put cover rally that happens to expire Froday??? Im shorting this market with both hands! Middle of a Fed rate hike cycle that most likeky wont end until mid late 2023 and earnings haven’t even been revised down yet? I find it hard to believe that the dollar has spiked through the roof crushing multinationals earnings and yet somehow earnings have not been revised down. So the next slide down will most likely be companies guiding terribly going forward.
CMON man!!!!!
As a matter of fact, July 19 figured out (c) wave finished  (1) wave  starting. For those  well informed about trading, NQ, Dow, S&P Normally stay close to vest.  Another words, Same pattern.   Yes did check both.   BUY AND hOLD DON'T WORK ANY MORE. ;)
Agree. Buy-hold-n-hope is dead
Nasdaq 100 Futures Aug 29, 2022 4:17PM ET could wave 5 be happening now. If so, wave has to be broke.;)   P.S   Even posted chart .   Wow INVESTING.COM    REALLY   !!!!.
lol this buy side author guy needs to quit trading and go bean count for a living all your articles are lies stop spreading your propaganda, only 1/2 way down in the bear wave and BECAUSE OF fools like you people lose money on wrong advice.
Ok, let’s follow your advice and circle back in a few months. Deal!?
i believe wave 3 completed oct 13 this is a wave 4 up to maybe 3810 area
agree
how can wave 4 overlap wave 2?
It can overlap in a diagonal
how can wave 4 overlap wave 2?
how can wave 4 overlap wave 2?
Thank you ! So, either way a multi month rally is coming?🤔
Yes, it’s a pay me now or pay me later setup :-)
Thanks for sharing. To me, this is the most objective and smart analysis that you have posted. Continue with the good work!
Thank you!
hi
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