Those who have followed us for at least six months know how well we have identified major turning points in the US stock market.
When the S & P 500 Index
SPX, + 0.07%
broke below 2,880 points in the fall, I found that I thought the negative risk outweighed any further upside potential. And as we now know, this division opened the door to the correction to the 2.345 level.
As S & P 500 dropped below 2,800, we set a bottoming goal between 2,250 and 2,335 for what I considered the initial phase of this greater degree of correction. That's what we've labeled as our a-wave on our 60-minute and daily S&P 500 charts.
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As we also know, the market was tied up within our target area (in the future), but did not give us a clear wave structure in the lower part of the region. But even before we tied up, I highlighted my expectations for the "corrective" rally, I once expected the a-wave to finish.
And for those who followed us closely, you would remember that my minimum goal for this rally from the 2,350 region was 2,800, with the potential to even rally as high as the 3,01
Elliott Wave Analysis divides this corrective rally I've been expecting (which is labeled as a b wave) with a substructure on [a] – [b] – [c]. While I had set my target for the wave on our card even before we tied, the market was 50 points higher than my ideal target region for this first rally off the lows. But as I also noted during the rally, the higher this [a] wave takes us, the higher we are likely to gather into our upper target region for the b wave.
At this point, it seems likely that the market has peaked in the [a] wave, and we are now in the jersey of the [b] wave rally. And I generally expect that the wave should split as I have outlined on the attached five-minute chart.
The question that we will seize in the coming months is how high this b-wave rally will travel. The answer depends on two things. Firstly, we need to confirm where the bottom of the wave tract will form. My minimum goal for that is in the 2,600 region at this time, with the potential to fall as deep as the 2,500 region, which you can see based on my target box on the 60-minute chart. And since the b-wave target often shows a relationship on [a] = [c] in its substructure, a wave bottom within 2,500-2,600 points is a target in the 2,900-3,000 region.
Since [c] the wave consists of a standard waveform Elliott Wave structure, and they tend to target the 2.00 extension of waves 1 and 2 within the waveform structure, we will be looking for a goal that gives confluence between the extensions of the waves one and two in the wave [c] and the relationship between the waves [a] and [c]. So, if the goal [a] = [c] coincides with the 2.00 extension of the waves one and two of [c]we have a high probability target for a top market in the coming months. But right now, it's too early to make such decisions, as we haven't finished the wave yet.
As long as the S & P 500 remains below the 2.725 region, I seek further downward in the coming week, as we form more of the [b] wave pullback structure. Alternatively, if the market is able to gather impulsively through this last week's high, it opens the door to the potential for the wave to be completed and we are already in the [c] wave rally and pointing us directly to the 2,940 region. This I have labeled as the "FOMO count", presented in purple.
As I have emphasized many times before we even started this correction, my ideal goal for this fourth wave correction is to a greater extent in the 2,100-2,200 range. In addition, I also believe that we will still see a multi-year rally pointing us to at least the 3,200 regions, with the potential to blow from top to as high as the 4,100 region, taking in the estimated time frame of 2022 / 23. We will not be able to identify the higher likelihood measure for the last rally stage until the waves one and two of the last rally are completed. We can then project our goal to narrow down a high probability of top target for the bull market, which began in 2009.
At the end of the day and on the basis of our general expectations, it seems that we are in seventh place stretch on this bull market.
See additional charts illustrating Avis wave counts on S & P 500 across different time frames.
Avi Gilburt is a widely followed Elliott Wave technical analyst and founder of ElliottWaveTrader.net, a live Trading Room with its intraday market analysis (including emini S & P 500, metals, oil, USD & VXX) analyst forum and detailed library of Elliott Wave education.