Elliot Wave Tutorial - How to Determine the Correct Wave Count

SP:SPX   Der S&P 500 Index
191 4
There are four dimensions in analyzing any market; Price, Time, Momentum, and Sentiment.
There are always at least two interpretations to any wave count, bullish or bearish . To discover the correct wave count you must move beyond the price dimension and focus on evidence from the other three dimensions.

The SPX chart illustrated is from 2014 - 2015. I've shown just one of several possible Elliott counts.
Even if the analyst knew nothing of Elliott , the pattern March to August looks like a base. What happened immediately after the last daily bar on this chart was a four trading day 11% decline.

There was an abundance of evidence in the dimensions of momentum and sentiment from April to August that would have alerted analysts of a possible bearish outcome.

Some of the momentum evidence was: 1) RSI bearish divergences; 2) NYSE new highs bearish divergences; 3) A/D line divergences.

Sentiment evidence came from: 1) high Market Vane Bullish Consensus reading of 65% at mid May SPX top; 2) VIX in early August at low level and a bearish divergence vs. the May level.

This is just some of the momentum and sentiment evidence. There was also evidence from the time dimension which is to detailed to explain in this post. There was also evidence in the price dimension from Fibonacci analysis.

Whenever the you find that the balance of evidence from all four dimensions is weighted in one direction, you look for wave counts that comply with the evidence.

Currently the SPX , other US stock indices and many indices world wide have the same bearish weight of evidence as April to August 2015.

The SPX in mid January 2017 is vulnerable to a 10% decline in the next two to four weeks.

Expand your vision beyond the price dimension, the answers are out there.


great post - can you please do a small video to expand on these concepts?

markrivest Reekardo
Hi @Reekardo,

Thanks for the suggestion. I write trading articles for several magazines, I will be doing an article on these concepts in the near future and will let you know when it is being published.


Nice post. Enjoyed it.
markrivest tomj2417
Hi @tomj2417,

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