S&P 500 IndexShort
Elliott Wave Analysis w/Decline Targets for S&P 500
This is both an update to my wave count, based on the latest developments, and an attempt to provide a more concise picture of what I am forecasting. You may see my previous charts for S&P 500 for more in-depth explanation.
Background Hypothesis: S&P 500 has been in its 4th wave of Grand Supercycle degree since the year 2000. This is an ABC correction. Wave A bottomed in 2009, wave B topped in May 2015 at 2137.1 but, as a contracting triangle, it actually completed its terminal wave 'E' in December at 2082.6. The falling action since December is the initial stage of wave C down.
As this wave C is the post-triangle thrust from wave B, the thrust measurement from triangle wave B should determine the minimum or approximate depth of wave C's decline. The post-triangle thrust would ideally be measured at the point of origin of the triangle wave (in this case the low of year 2009, where wave B started) as the vertical distance between the backward-extended trendlines of the triangle at that past moment, yielding the expected minimum future thrust distance from either the extreme of wave B or from the end of wave E of B.
However, in this case, the span of the price distance measured at that point in time is so wide that it would actually imply a decline of the S&P well into negative territory. That would seem to be beyond the realm of possibility, unless deflation did somehow push corporate America over such a steep clifff of debt that our current scale of equity valuation would need to be rethought. Well, the idea of negative interest rates was unimaginable by most people until recently, too.
In any case, there are Elliott Wave guidelines which would tend to preclude such a deep decline for this wave, including that a C wave typically reaches its maximum span of travel at 1.618 the length of wave A (suggesting a potential lowest tolerable level of around 700 for this C wave decline in the S&P index), and more obviously that a 4th wave will not fully retrace the impulsive sequence it is part of (certainly staying above zero).
I have found, as well (see my analysis on EUR/USD for an illustration of this phenomenon on a chart) that post-triangle thrust waves (which are 5-wave impulsive sequences) often occur in stages whereby the height (or depth) of each notable spike of the thrust sequence corresponds to a thrust-measurement at each successive possibly valid point of origin found working backward in time through the body of the triangle toward its true origin, until the thrust wave based on the true point of origin has been fully realized. Again, this may be difficult to envision just from my explanation here, and so I recommend seeing my EUR/USD chart for ongoing examples.
In the case of the S&P 500, I strongly suspect that we should be considering as the point of origin of wave B, at least presently, for measuring the thrust distance of the initial stage (first wave) of wave C, as the low of October 2014. A thrust measurement taken there has both readily conceivable and interesting implications for price action.
Read my forecast below
Background Hypothesis: S&P 500 has been in its 4th wave of Grand Supercycle degree since the year 2000. This is an ABC correction. Wave A bottomed in 2009, wave B topped in May 2015 at 2137.1 but, as a contracting triangle, it actually completed its terminal wave 'E' in December at 2082.6. The falling action since December is the initial stage of wave C down.
As this wave C is the post-triangle thrust from wave B, the thrust measurement from triangle wave B should determine the minimum or approximate depth of wave C's decline. The post-triangle thrust would ideally be measured at the point of origin of the triangle wave (in this case the low of year 2009, where wave B started) as the vertical distance between the backward-extended trendlines of the triangle at that past moment, yielding the expected minimum future thrust distance from either the extreme of wave B or from the end of wave E of B.
However, in this case, the span of the price distance measured at that point in time is so wide that it would actually imply a decline of the S&P well into negative territory. That would seem to be beyond the realm of possibility, unless deflation did somehow push corporate America over such a steep clifff of debt that our current scale of equity valuation would need to be rethought. Well, the idea of negative interest rates was unimaginable by most people until recently, too.
In any case, there are Elliott Wave guidelines which would tend to preclude such a deep decline for this wave, including that a C wave typically reaches its maximum span of travel at 1.618 the length of wave A (suggesting a potential lowest tolerable level of around 700 for this C wave decline in the S&P index), and more obviously that a 4th wave will not fully retrace the impulsive sequence it is part of (certainly staying above zero).
I have found, as well (see my analysis on EUR/USD for an illustration of this phenomenon on a chart) that post-triangle thrust waves (which are 5-wave impulsive sequences) often occur in stages whereby the height (or depth) of each notable spike of the thrust sequence corresponds to a thrust-measurement at each successive possibly valid point of origin found working backward in time through the body of the triangle toward its true origin, until the thrust wave based on the true point of origin has been fully realized. Again, this may be difficult to envision just from my explanation here, and so I recommend seeing my EUR/USD chart for ongoing examples.
In the case of the S&P 500, I strongly suspect that we should be considering as the point of origin of wave B, at least presently, for measuring the thrust distance of the initial stage (first wave) of wave C, as the low of October 2014. A thrust measurement taken there has both readily conceivable and interesting implications for price action.
Read my forecast below
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