Those who followed us for at least six months know how well we've identified the major turning points in the US stock market.
When the S & P 500 index
SPX, + 0.07%
collapsed below 2,880 points in the autumn, I noted that I think the risk of a decrease exceeds any further potential for growth. And, as we already know, this breakthrough opens the door to the adjustment to a level of 2345. As the S & P 500 dropped below 2,800, we set up a bottom line between 2,250 and 2,335 for what I saw as the initial phase of this larger degree of correction. This is what we have identified as our a-wave of our 60-minute and daily S & P 500 graphics.
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As we know, the market reaches the bottom of our target region (in futures), but it does not give us a clear structure with five waves at this end of the bottom. However, even before we reached the bottom, I stressed my expectations for the "corrective" rally I expected after a wave.
And for those who followed closely, you remember that my minimum target for this rally outside the 2350 area was 2,800, with the potential to bring even higher than the 3 01
At this point, it seems likely that the market is at the forefront of the wave [a] and we are now in the throat of [b] wave. Normally I expect [b] the wave to subdivide, as I outlined in the attached five-minute graphics.
The issue we will be struggling with over the next few months is how high the b-wave rally will pass. The answer will depend on two things. First, we need to confirm where the bottom of [b] is formed. My minimum target for this is in the 2,600 region at that time, with the potential to fall as deep as the 2500 regions, as you can see on the basis of my goal in the 60-minute chart. And since the purpose of the b-wave often shows the connection of [a] = [c] within its substructure, the wave bottom [b] within 2,500-2,600 points to a target region in the region of 2,900-3,000. this, since the wave [c] consists of a standard 5-wave structure of Elliot Wave, and they tend to target the 2.00 expansion of waves 1 and 2 within this five-wave structure, we will look for the target t which provides a merger between the one and two wave expansions in the wave [c] and the relationship between the waves [a] and [c]. So if [c] = [c] target coincides with 2.00 waves expansion one and two out of [c]we have a high probability of a top-end market in the coming months. But right now it is too premature to make such decisions because we have not yet completed the wave [b].
So, while the S & P 500 remains below 2725, I'm looking for a further week decrease as we form more than [b] the reverse wave structure. As an alternative, if the market is able to impulse this past week, it opens the door to the potential that the wave [b] is already completed and we are already in the rally [c] wave, directing us to the 2940 region. What I have labeled as "FOMO count", represented in purple.
As I have emphasized many times before we started this adjustment, my non-ideal goal for this fourth-wave correction is to a greater extent in the 2,100-2,200 region. Moreover, I also believe that we will still see a rally of many years leading us to at least 3200 regions, with the potential to hit up to 4,100 regions, leading us to the expected 2022/23 expected time, We will not be able to we identify the higher probability goal for the last stage of the rally, while waves 1 and 2 of the last rally are completed. Then we can design our goals to limit the high probability of achieving the bullish market target that started in 2009.
At the end of the day, and based on our general expectations, we seem to be on seventh place.
Explore additional charts illustrating S & P 500's Avi waves across different time frames.
Avi Gilbert is a widespread technical analyst and founder of Eliot Wool, founder of ElliottWaveTrader.net, a live trading hall including his day-to-day market analysis (including emini S & P 500, , USD, and VXX), an interactive analytics forum member, and a detailed Eliot education library.