SP500 Elliott Wave Update: Competing Interpretations

May 8, 2009: 12:21 PM CST

Let’s take a quick look at the updated Elliott Wave Counts for the S&P 500, noting one ‘ultra-bullish’ interpretation and one ‘ultra-bearish’ interpretation… and a moderate interpretation thrown in for good measure.

The top-view is that we are in a large-scale “Three-Wave ABC” correction of Wave 4 that began in 2000.  Wave A was 2000-2003; Wave B was 2003-2007; and Wave C began 2007 – ????.  With that in mind, let’s see how Elliotticians are interpreting the current 5-wave “C” Correction we are in currently.

First, the “Ultra-Bullish” Count, which implies “Wave C” has ended and now we’re in Wave 1 UP of a Large-scale Wave 5 (aka beginning of new multi-year bull market).

This implies that the Bear Market is over.  In Elliott nomenclature (and wave characteristics), a “Wave 1″ will form when the prevailing sentiment is negative.

Wave 2 will be a “Told You So!” decline that fails to make a new low and surprises everyone when it turns up.

It’s only on the upswing into Wave 3 that people begin to realize “Oh my gosh – we’re in a new Bull Market.”

Let’s now move to a “Moderate” Elliott Wave count which would imply further potential for upside, but eventually target a retest of the March lows at a minimum or a slight breaking of those lows perhaps later in the year.

Under this count, Primary Wave 3 bottomed in November and we’ve been experiencing a protracted Primary 4th wave (specifically an “Expanded Flat”) which could reach a terminal (final) point somewhere in the 1,000 region ((C) would need to make a new high above (A)).

The implication is that the current wave will be a 5-wave affair (C waves subdivide into 5-waves… except in a triangle) to break above the Wave A high and then afterwards, fall back down into a 5-wave decline to take us back to retest or break the 667 lows months into the future.

I call this the more “moderate” or ‘compromise’ count because let’s now look at a more bearish count:

I would go as far as to say this is *the* most bearish interpretation (Corey’s note:  I do not accept any wave count that assumes Primary Wave 1 completed in March and that the final target would be in the 100s for the S&P 500).

This count implies that Primary Wave 3 completed on the March Lows, and that a triangle formed for the fractal Wave 4 of Primary 3 (an interesting interpretation) and that we’re currently perhaps in Wave A up of an ABC Wave 4 that could take us up to 1,100 or even higher.

However, it is ‘bearish’ because it assumes the Bear Market has many more months to complete (perhaps mid-2010 or later) and that the final target will be lower (perhaps 550 – 600).

In terms of the ‘multiple interpretations,’ the collective forecast then was the same – after we complete a move to new lows, a strong “Wave 4″ rally will take us back to the 1,000 level.  Afterwards, a decline will begin.  In my opinion, the precise count is not as important as the collective interpretations.  If we rise as Wave 1, Wave 4, Wave A … it doesn’t so much matter short term because all virtually all Wave counts called for a strong rise.

After that rise, we begin to diverge – one interpretation says we will not make new lows but notice now what the collective forecast shifts to:  If we begin Wave 5 down, or begin Wave B down, the collective forecast will call for some sort of decline.  It’s up to more experienced Elliotticians to do the work to project targets, etc but for the average person, I think it’s most important to look at a couple of primary counts and then ask “Are there any points that the “next likely swing” projection aligns across non-correlated counts?” If so, then you’ve just used Elliott Wave analysis to arrive at a ‘confluence’ projection.

Does that mean it will be right?  No, but your goal is to put the weight of the evidence in your favor as best you can with the information you have.

And above all, remember that Elliott Wave analysis, along with any aspect of Technical Analysis (cycles, oscillators, trend, volume, patterns, Fibonacci, Gann) is not ‘god of the markets’ and nothing – to my knowledge – can give you a crystal clear forecast into the future.  Not even Fundamental Analysis can do that.

I’m also a strong proponent of the “Next Likely Swing”  Principle.  I believe that you can assess the immediate future (price swing) with better accuracy and confidence than you can forecast the next 5 swings, or 2 years out, etc.  Thus, your goal should be to look at a variety of inputs (fundamental, technical) and make a decision based on the weight of the evidence.

That being said, when you look at Elliott Wave Analysis (nothing requires you to do so), it’s important to have an open mind and know where your dominant opinion will be proven wrong (Elliott Wave only has three immutable rules after all) and then switch to an alternate count as needed.

The above three counts represent – in my assessment – three valid interpretations of the possible Elliott Wave Count.  Look for areas of alignment and fit this into your own research and analytical methods that you use currently.

Corey Rosenbloom, CMT

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

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101 Comments

101 Responses to “SP500 Elliott Wave Update: Competing Interpretations”

  1. Serge Says:

    Both bearish interpretation assumes top of the Wave 4 around 1000, which could be well above 200dma (currently, ~954 and falling). Wouldn't it mean a negation of bear market ? For example, none of bear rallies in 1929-1932 crossed 200dma:
    http://www.ritholtz.com/blog/2009/04/great-depr...

    Can you give an example of a bear market rally crossing 200dma and falling to the new lows ?

  2. Corey Rosenbloom, CMT Says:

    Serge,

    Not necessarily, no – though it is compelling when price does cross that 200 SMA (reference back to 2007). Bear market births and deaths aren't as simple as a MA cross – I wish that were the case though.

    Think of the psychology behind that – which is what Elliott Wave is trying capture – crossing above the 200 would trigger a flood of buying and confidence and – if price was to head lower – price would be pushed lower in part by people being suckered back into the market only to have it collapse when they though the bull was back.

    The Elliott Structure (bear market) would be negated only if we got a close above 1,250 which would mean that we could no longer be in Wave 4 and would be forced to turn to the “Most Bullish” count as listed above. Thus, 1,250 is the line in the sand for any bearish Elliott Count as I see it.

    Who knows – the 'most bullish' count might be the dominant one after all but I'm skeptical with the information I have at the moment.

  3. aac74 Says:

    Loving the DISQUS comments :)

  4. Andrew Stanton Says:

    The last two counts are effectively the same since they are just different ways of getting the market into the current circle 4. The normal equality of waves 1 & 5 and the similar ending targets for circle 4 means the odds favor circle 5 ending in the same general area. Either one is preferable to the first which sports a clear three wave circle 5; nice attempt to make it five but I'm not buyin' it.

  5. Karl Says:

    I have noticed that you are doing this for the S&P, but I was wondering how different the Nasdaq interpretation would be from this one since it had been making much greater advances?

  6. LLZ Says:

    The Wave 5 count in the “Most Bullish” chart doesn't violate any rules, per se, but there are several EW guidelines that should give one pause with this count. Having the “right look” is in the book, after all. To whit:

    Wave 2 is usually a sharp correction retracing more than 50% (.618, .75, .786)…this Wave 2 retraced just a hair over 50%
    Waves 2 and 4 should alternate, so if Wave 2 is a sideways correction (and again it's usually a sharp correction), then Wave 4 should be a sharp correction. Wave 2 in this count is sideways and covers more price area than Wave 4.
    Wave 2 took sixteen days to complete and Wave 4 consumed just two. Again it is usually the opposite; Wave 2 is short and sharp, and Wave 4 takes at least as long as Wave 2, but usually longer. Sixteen days vs two…just doesn't look right.

  7. Andrew Stanton Says:

    LLZ, your points about circle 5 are exactly why I call that wave a three instead of a five. The size of (2) and (4) are so disproportionate that the odds they are of the same degree is very small; possible but just not a preferred, or even secondary count. Glad to have some company! That wave reminds me of the big wave down from the Summer of 1998 top that the Elliott Wave people insisted was a (first) impulse wave down that would lead to a third wave crash. Well it turned out it was an a-b-c correction and not a five. The jury is still out on this one but I will be very surprised if that first count turns out to be correct.

  8. LLZ Says:

    Thanks for the welcome Andrew, glad to be here. “the odds they are of the same degree is very small..” is what I was trying to say in my roundabout way. You put it much more succinctly.

    At least with this count there is clearly a clean impulse (although we think A, rather than 1 of 5). I went back and looked at the daily of the drop in 1998 and that is just fugly. Lemme guess, the GA, if-it-goes-down-its-an-impulse, boys? No offense to any Georgians here.

    As you say jury is still out, and I'll add will render the verdict on its [i]own[/i] schedule. What's nice though, is that all the counts appear to have some upside yet.

  9. Elise McClintick Says:

    Found it. Sorry about the previous email. Love your site. Elise

  10. blues Says:

    Maybe 100 on spx is a bit extremem, but I don't see why we could not go to 300 or 200 which is back to 1980s… Are we any better off then 1980s now? Our DEBT level has reach extreme. Our economy is not any better, all the manufacturing has been lost. So what's left of America? The only thing American understand to do now is to consume and spend spend spend… what else do they know? And what else can they do? Oh maybe only service sector left, everyone will just serve everyone else?!

  11. Corey Rosenbloom, CMT Says:

    aac74,

    Thanks! I am too – much improved over the prior comments. I'm still trying to figure everything out about Disqus!

  12. Corey Rosenbloom, CMT Says:

    Andrew,

    I'm with you. I thought I should play 'devil's advocate' for that as a possibility. It doesn't 'feel' right but there are some who have this count so it's an alternate view.

  13. Corey Rosenbloom, CMT Says:

    Karl,

    To an extent, these markets should have identical if not near identical counts. Perhaps the wave structure would be a bit clearer, or there would be an early signal on the NASDAQ which tends to lead, but the count would not be radically different in my opinion.

  14. Corey Rosenbloom, CMT Says:

    LLZ,

    I'm with you 100% – it's (Bullish Count) not right – I just didn't verbalize it well enough.

    Thank you for sharing – very good insights.

  15. Corey Rosenbloom, CMT Says:

    Thanks Elise!

  16. Corey Rosenbloom, CMT Says:

    Blues,

    Good point! I tend to work far more with the technicals than the fundamentals or news projections so I can't comment about the longer term economic projections.

    I will go on record as saying it would surprise me if the S&P dropped beneath 500 or less anytime soon, or even into 2010. I'm more in line with the moderate viewpoint.

  17. R.Manivannan Says:

    Best wishes, Corey & all Elliott wave practitioners let your interpretations for a downward movement of market be right at least this time.
    You all have been expecting it for quite sometime.

  18. Corey Rosenbloom, CMT Says:

    R.

    I know of very few forms of analysis that have been correct for this whole move up.

    Basic statistics in terms of reversion to the mean has even been wrong! Overbought oscillators, confluence Fibonacci, volume, breadth, and momentum divergences.

    Price – supply/demand imbalance – ultimately rules the market, not sophisticated analysis. All we can do is manage risk no matter if we're biased to fundamentals, techncials, or quant.

  19. R.Manivannan Says:

    Yes, end of the day it is only supply and demand that determines the price.
    Great effort Corey.
    We miss your Indian Nifty analysis.

  20. Jim Hatton Says:

    corey. Nice work.

    FWIW, I think the third scenario – certainly on a weekly close line chart, stripping out all the noise, May 2008 to March 2009 looks like one big wave 3.
    On a separate note consider also that this rally looks strikingly similar in pattern thus far to the March 2003- October 2007 recovery rally, albeit a smaller fractal. We would seem to be at a comparable point as March 2007 was to that rally, with the pattern potntially topping circa 980 ish. Take a look.

    Jim Hatton

  21. tgarfield Says:

    http://stockcharts.com/h-sc/ui?s=$INX:$USD&p=W&...

    Would using a different metric narrow down the 3 choices? You can see this looks pretty different.

  22. chris Says:

    Corey,

    Many thanks for yet another thought provoking article! There are clearly some intersting movements developing and forces/perceptions at work in the market at the moment. I like to trade / look at longer timescales than yourself and for what its worth I personally think the aruguement for the time being has been won in the bulls favour. I may be proven wrong but I just see that there is too much stimulous around at the moment: government spending, low interest rates, low energy prices and quantatitive easing…. so much so, infact, that I think we may have over cooked it. The big danger I see to economic recovery is energy prices taking off which coupled with the debt burden recently incurred (in getting us out of the current mess) pushing the economy into a double dip ression around mid 2010. I am therefore currently bullish about the market and by implication energy and in particular natural gas.

    I have some other interesting ideas / market corollations about energy, which afterall ultimately drives the economy, but I've been rambling on a bit and will save this for another day!

    Chris

  23. Vol Says:

    I have to agree with comments about supply/demand.

    I think when we were in the massively oversold condition, the “big boys” (aka big hedge funds) realized there is not much money to be made with bets on the downside (not many big sellers left), so they covered all the downside bets and went long simultaneously. now they are just sitting there squeezing/limiting supply. (Naive example: Imagine if 5 people owned 95% of google shares and they had no sell orders at any price. You could bid the price to infinity and it still wouldn't matter)

    So, the “little guys” (aka mutual fund managers, retail investors, automatic 401k contributions) are paying about 40% more than two months ago and that premium is going up everyday! I am not convinced that there is any panic buying yet although I think there is a little bit of that going on. Once there is massive panic buying by the “little guys”, I expect the “big boys” to start covering bets on the upside.

    If you are thinking why I don't even mention the disastrous state of the economy, its because I am convinced more and more everyday that the stock market is just a first-in-first-out scam. But hey, as long as I am making money off it, I don't give a damn =). It is true what they say, the market is a casino and the feds (puppets of goldman and the rest of the banking crew) own the casino.

    Everyone tries to correlate the stock market and the economy. I thinks its all BS. Frankly, I thought the economy was in the gutter when we were at 1500+ on the SP500. Apparently people didn't realize that until the media started bombarding the public with “oh god, the stock market dropped 50%, the world is gonna end” rhetoric.

  24. chris Says:

    Vol,

    I agree with all you say but you don't need to run the casino to win, infact if you're nimble you'll beat the owners and go home with a profit….I'm a bit cynical about the powers that be but I have to hand it to them that overall the system works and the small guys can win if they think ahead.

    Chris

  25. chris Says:

    Vol,

    An additonal question: the 'big boys'…..do you think they always win or is this all part of the physcology? I love this stuff because as far as I'm conernened this kidology, confusion and uncertainty equals profits!

    I don't believe the 'big boys' exist which, on reflection, is probably why I tend to do okay. It is a game you're right, but its a game with a past and therefore a record, which, for me at least allows me to seperate the emotion out of the trades I make. I guess its not that simple because I've put in huge amounts of effort over a long period of time to feel this confident at this point in the cycle but even so I have to say that I get perplexed by the confusion that seasoned traders manage to get themseleves into. Maybe I'm lucky to have a day job to help regulate/deflect my thoughts this but it goes to show that if you can control your emotions you will suceed.

    Chris

  26. Vol Says:

    by “big boys” i typically mean groups that can control a good chunk of the volume, which is typically hedge funds and quant funds. in this game, if you control volume, you control supply/demand, therefore you control price. just basic economics. i don't give a lot of weight to past data points because there are too many variables at play and too little data points to sample from past history.

    it is kind of a monopoly/duopoly/oligopoly which is illegal in the business world but ignored for the most part in the stock market due to vested interests at the top of the food chain and incompetence of the parties that are supposed to be the guardians. aka, the SEC. but i also think it is almost impossible to enforce.

    like you, i have zero emotion in the market. no investing (i realized it was a scam quiet early in my life). only quick trades that last a few days at most. for the most part, i look for stocks with huge upward momentum and jump in for a quick ride up with a tight stop-loss and a sell trigger to take profits. then move on to the next bet. i do make some buy-low-sell-high moves in accounts where i cant setup quick trades, like in my company 401k.

    i like this site precisely because it is purely based on technical analysis. i don't have time to day-trade due to a full time job but i find this site very interesting probably because i am a math guy and i don't believe a single word coming out of the mouth of politicians, CEOs, feds, etc. who all have a stake in the game and at the same time are writing the rule book.

  27. chris Says:

    The way we approach and think about the market is completely different which I find so interesting. Insider trading is rife and Chinese walls don't exist: its just human nature and obviously the case. But the wispers can confuse the 'insiders'…..this game is all about confidence, in my opininon, and thinking ahead – what exactly is going spur or slow the economy in the future and why…..work this out and then back to implications on the sectors and your on to a winner if you ignore the headlines. Infact I look to negative media as verification at the moment especially when it comes to unemployment figures because they could never be any other way!

  28. R.Manivannan Says:

    Well said.

  29. tgarfield Says:

    Many large companies are international and make significant earnings in foreign dollars. IF the US dollar dropped then these companies would still have value and could hold the indexes up by themselves in US dollars.

  30. David Says:

    I have a little over a year of experience in the market and it's been over the course of the past month that I've come to realize that it is indeed a scam. The stock market is gambling, pure and simple. Yet Wall St and brokerage propaganda has legitimized it to the point that regular folks who would never dream of taking their hard-earned savings into a casino will willingly put it into the stock market.

    I got into the market believing that fundamentals (P/E ratios, EPS, etc) and technical analysis drove the market, and that if I studied them thoroughly I could make money. I bought into the bullcrap. I thought those things meant something and that investing was a world away from the blackjack table, when in reality they both seem to require the same set of skills and traits in order to be successful. I'm still not sure how I feel about that. I've never been a gambler.

    I think it's possible to become profitable as a retail investor, I just haven't figured out a way to do it yet. When looking at a chart it's easy to find indicators or patterns that “fit” and make the market's activity seem predictable. But on closer inspection I'm often able to find just as many, if not more, that failed. There are many entry signals and candle patterns that I've read about, whose virtues are extolled by experienced professionals, but when I put them to the test their odds are invariably no better than chance. My testing thusfar has not been encouraging and as a result I've quit real money trading altogether.

    I do enjoy this, frustrating as it may be at times (need to work on emotional control), and want to learn more about it. My problem is that this industry is littered with snake-oil salesmen selling worthless advice and worthless trading systems, so I'm very skeptical about paying anyone to teach me how to learn it. I don't know who's reputable and who isn't. For now I'll continue testing different ideas, who knows maybe one day I'll stumble onto something good.

  31. Corey Rosenbloom, CMT Says:

    Thanks Chris! Very good thoughts and I share them as well.

    There are consequences to governmental intervention – it's not perfect. Unless the Fed can remove the liquidity (they say they can but do we believe them?) then one of the consequences will be inflation. By how much is yet to be determined but a government most likely cannot print money and not have some ramifications.

  32. Corey Rosenbloom, CMT Says:

    True.

    I'll try to continue doing weekend posts for you all! The Nifty has been so strong over the last few weeks – it's been an amazing move!

  33. Corey Rosenbloom, CMT Says:

    Jim,

    Excellent comment. If so, then it's been a horrific Wave 3. But that's what wave 3's are supposed to be – you have continuity of thought and a run-away market.

    Excellent comparison as well – I'll have to look more into the 2007 rally.

  34. Corey Rosenbloom, CMT Says:

    That looks neat! Relative Strength of S&P to the Dollar Index. It does look different.

    I've seen other charts comparing the Dow in terms of Gold (looks horrible).

    These charts are powerful 'behind the scenes' indicators that we definitely should be seeing.

  35. Corey Rosenbloom, CMT Says:

    I'm loving Disqus (new comment system) and I love the reader interaction with each other! I'm glad to see a discussion developing and traders helping other traders and sharing thoughts on here.

  36. stockchartist Says:

    Wave counts confuse me. I'll stick with trend analysis based on trendlines and moving averages. I've come to the same conclusion as you (i.e., another leg down but this last one shorter than March and more similar to last November) but have done so based on an emerging inverted head-and-shoulder bottom pattern. See my analysis at http://www.stockchartist.blogspot.com

  37. u2com Says:

    Hello,

    my feelings is that this is just Primary 2 rally of cycle C. Here on this blog we had amazing similarities with great depression few month ago. Volume tend to be higher on the new bull market at the beginning, so bullish scenario is with much less probability I would say.

  38. Raimund Says:

    Hi Corey, great analysis you`re doing. But I would also ask why aren`t you taking into account that this is only Primary wave 1 of C? If I understand your count correctly, than there is only primary wave 5 of C missing before the whole trend will turn into a new bull market.

    But, for example, Prechter is counting the current fall as the end of Primary wave 1 and we are now heading higher into Primary wave 2 of C. So why is this count not even a possible count interpretation for you? Is there any rule broken with such a count?

    I think that we`re seeing a very huge C wave drop, back to the previous fourth wave in 1974.

  39. Corey Rosenbloom, CMT Says:

    Raimund,

    No, there's not a rule broken, and I know it's difficult to stand against the analysis of one as respected as Mr. Prechter, but I know of traders who lost tens of thousands of dollars following his proclamations for a market crash that he has been predicting since 1986 that has failed to materialize, costing those who follow such counts many opportunities to make money. I'm afraid a bearish bias is driving the wave count, and counting waves is very subjective.

    My philosophy is that IF end-of-the-world doom and gloom is going to happen, it will happen but there's no point in preparing yourself and not living your life to the fullest in the meantime until it happens (if it happens).

    There's a lot more to it than that, but I have no interest in “the sky is falling” predictions and do not entertain them in my analysis.

  40. Corey Rosenbloom, CMT Says:

    Good point! I agree that we're most likely not starting back into a primary bull market just yet. I think we need one more swing down to at least test the lows to form a double (or perhaps triple) bottom to be certain of a new bull market, lest it take us by surprise.

  41. Corey Rosenbloom, CMT Says:

    Very good analysis – thank you for sharing. I enjoy visiting your site.

    Don't worry – Elliott Wave is just one form of market analysis and I believe trend structure and basic price principles are far more important. It's just like Fibonacci, Gann, Cycles, Oscillators, etc but I believe studying Elliott Wave can give insights as to price projections and developing structure, adding one more piece to the analytical puzzle.

  42. Henry Says:

    You did a great job.
    Does your Wave (5) of 3 ended at Novermber low in your first two charts, have 5 micro waves? It's fourth micro wave reached 911 while the bottom of the first micro wave was only 904. I tried to post my drawing or send it to you but don't know how.
    Further, the monthly chart seems more consistant to your bearish chart. My drawing is different from all your charts, but reaches the same conclusion that the wave 4 starts fron the March low.
    Best regards, Henry

  43. David Says:

    Mid-Week update from wavespeak.com

    It
    looks like initial resistance has been found at January’s high on the SPX and the 200-day moving
    average on the Dow and SPX. Still, it doesn’t look like weakness will be sustained, given the
    incomplete nature of the up leg off recent lows. The move still sports a very apparent three-wave
    form, and unless we’re in the final move of an ending diagonal (which we’re not), a three-wave move
    cannot complete a trend. In this respect, the same analysis that applies to action leading into March’s
    lows applies here.
    Meanwhile, the recent sell signal issued on the Bullish Percent Index (BPI) has been reversed, moving
    this indicator right back towards all-time highs. During the course of this 12.5-week advance, price has
    had no problem continuing higher through a slew of different technical readings that suggested a
    change in market direction was pending. These included some historic readings, such as the lowest
    Put/Call Ratio we have seen in about a decade, the highest reading ever recorded on the
    Advance/Decline Ratio, and the most extended period of time ever recorded on daily Stochastics. We
    have to wonder if the test of all-time highs on the BPI will be different. This indicator displays the
    percentage of stocks on the NYSE that have buy signals on their respective point-and-figure charts.
    It’s not as confusing as it sounds – essentially, it just means stocks that are in an established up trend.
    In terms of the current reading, that means that 70 to 75% of the NYSE stock universe has been
    trending upward since at least early May. Since 1987, this indicator has reached 70% only eight times.
    Needless to say, it is very difficult to maintain such a high reading, and history bares that out.

  44. Paul Davidson Says:

    Hmmmm. Market is bumping at the 1000 mark and heading down with strong support. Perhaps the bearish analysis is still in pay here.

  45. Osso Says:

    Hi there !!!! have been reading several posts from you,CR, and appreciate the TA quality of them all. Really. I was wondering if you day trade,or swing trade or trade, anyway, and if you post set ups. Where would that be…???? tks and congrats. !!!!

  46. Rich Says:

    That's what I like about e-wave. It explains everything but can predict nothing. Who cares what the past wave count is if you can't say what the future holds with some certainty.

  47. Corey Rosenbloom Says:

    If you have anything that predicts the next move with certainty, feel free to share it with us! I know of nothing that can.

    Replace the words “Elliott Wave” with any of the following: “Stochastic Oscillator” “MACD” “McClellan Oscillator” Moving Average” “Doji Candle” and you’ll get how I use Elliott Wave – one tool out of a toolbox of many strategies and indicators.

    Getting angry or sarcastic about why a stochastic gave a false buy signal makes no sense in my opinion and the same with Elliott Wave, Gann, trend following or any other methodology.

  48. CallMeIshmael Says:

    I agree that the current rally is not part of a long term bull. But the overlaps in this wave precludes it being an impulse wave. It is more likely a corrective wave. But there is a fourth possibility. While your second chart correctly identifies it as a “C” wave it is likely the completion of A “2″ wave, the march low being the fifth wave completion of a “1″ wave. If this interpretation is correct, what we are setting up for is the begging of a “3″ of “3″. That is the most bearish possibility and probably the likeliest.

  49. paulbjaylee Says:

    Also of note, that 100,000 figure pales in comparison to the 5.4 million homeowners who were either delinquent or already in foreclosure in the first three months of the year. And it’s a drop in the bucket next to the estimated 15.4 million homeowners whose fidelity 401k outstanding mortgage debts are larger than the values of their homes. Allison responded that the administration will “have to be agile as we look at this program as well.” He continued:

  50. robertpodlasek Says:

    Why dont you do a fraction 5 count from march 9 till now I think where in wave 5.which would put a top on s&p at 1000ish.But if where in wave 3,that changes the math.From jan 1 to march9 you got a textbook perfect 5wave down,do we <have to have a 5wave in this march9 to august rally>!!
    HHHHHHEEEEEELLLLLLPPPPPPPPPPPPP.IS this covered in the premium site?

  51. Quick Daily Look at Dow, NASDAQ, and SP500 Year to Date | Afraid to Trade.com Blog Says:

    [...] out my May update post on “Competing Elliott Wave Counts in the S&P 500” for a broader perspective, in which all counts targeted the 1,000 level as a likely outcome, [...]

  52. Quick Daily Look at Dow, NASDAQ, and SP500 Year to Date | Penny Stock Trading System Blog Says:

    [...] out my May update post on “Competing Elliott Wave Counts in the S&P 500” for a broader perspective, in which all counts targeted the 1,000 level as a likely outcome, [...]

  53. stevewalters Says:

    I am getting involved with wave theory simply to be used as a trading system. If we could draw line connect the dots and enter it into a computer we would have a money machine. I know of people who make money no matter what the market does. They use spreads when its going side ways and other strategies for up and down moves. Great Blog

  54. Ziggyzag Says:

    I haven't seen it but I believe EWI's newest financial forecast is calling the current rally a Wave 2 rally? Any idea if this is true and if so how they are getting this?

  55. August Long Term Elliott Wave Update on SP500 | Afraid to Trade.com Blog Says:

    [...] S&P 500.  I will show the two most plausible Elliott Wave Counts which remain unchanged from May’s Elliott Wave Update (which successfully targeted 1,000 as a minimum upside target in the S&P 500).  Please review [...]

  56. CallMeIshmael Says:

    Take a look at EWI's latest STU (08/03/09) and note their chart of the US Dollar. It's a daily chart but it obviously hasn't been updated in at least two weeks! What gives? Is anyone doing their homework over there or are we expected to trade on two week old analysis? They've been calling for a US Dollar rally. Meanwhile the dollar has broken down. Does anyone over there notice this?

  57. nickmarshall Says:

    The first count with wave 5 bottoming in March ticks the most EW boxes. Against it are the the lack of alternation between waves 2 and 3 and the wave 5 does have the look of an ABC rather than 12345. However the moderate count is less appealing: the wave 4 has now lasted 4 times as long as wave 2 and thus destroys the parallel trend channel. I struggle to count the (C) part of the wave as an impulsive wave because of the overlaps. The third, more bearish count, I have equal difficulty with. The a and d waves of the wave (4) are not obviously abc although, as a triangle, it does alternate with the wave (2) zigzag but is almost twice as long in time. Also the wave v of (3) failed to make a new low. However, I cannot understand your interpretation of the first count as being “Ultra-Bullish”. It is completely dependent on your interpretation that the C wave ended in March. I think it far more likely that the 5 waves that ended in March are the end of Primary wave 1. The correction in progress is the largest since the top in October 07 and is simply a Primary wave 2. Wave 2s are characterised by a return to extremely bullish sentiment which we were seeing earlier in the month (88% bulls) and it has been an extraordinarily swift gain of 50% in 5 months. I doubt the bottom is in – there simply was not enough despair and where is the wall of worry that could be expected off a major bottom? The steep rise since March hardly looks like that. P/E ratios and yields have not even come close to what could be expected at a major low. If 2000 was the end of the 5 wave advance from the wave 4 which ended either in Oct 74, then it is usual for the retracement to enter the area of that previous wave 4 or between 120 and 62. In the case of the Dow, which made a wave 4 low either in Dec 74 or Aug 82, it means a low between 1067 and 570. This is what accounts for Robert Prechter's call for a sub 1000 Dow. It seems preposterous until you start to think about the amount of credit creation over the last decade, the subsequent vaporisation of trillions of equity and real estate wealth and the fact that nothing has really changed since March. Billions of debt are still sitting on the books of financial institutions (including the Fed which swopped $800 billion of high quality debt for twice as much rubbish), housing defaults continue to rise and so does unemployment. The US government has spent $3-4 trillion and committed $11 trillion in total but has got little other than an obligation to pay back a vast debt. It will try to inflate the bill away but either way the US taxpayer will be footing the bill for a generation or two.

  58. stock market Says:

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  59. contribute_401k Says:

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  60. 401k mean Says:

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  61. Name Says:

    Hi Corey, how about an update or followup to this topic.

    SP500 Elliott Wave Update: Competing Interpretations

  62. Grand Supercycle Says:

    My monthly indicator for the USD is still giving bullish warnings.

    Will the USD rally when DOW bear market rally ends ?

    VIX index also continues to give bullish warnings (bearish for stocks)

    I warned of an impending stockmarket crash back in early *2007*

    http://twitter.com/GrandSupercycle

  63. The Line in the Sand Overhead for the NASDAQ | Afraid to Trade.com Blog Says:

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  64. The Final Line in the Sand Overhead for the NASDAQ | Penny Stock Trading System Blog Says:

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  66. davidmorson Says:

    Wow, that was just awesome, extremely interesting one article.

  67. thetradedetective Says:

    Hey Corey,

    Wow Elliot Wave is tricky stuff; even after watching / reading your analysis it seems like voodoo to me.

    My question is, after reading this article I wonder how often you acutally use Elliot Wave in your trading. I mean, is it all just fun to make pretty charts or do you actually use the predictive capacities of E.W.?

  68. thetradedetective Says:

    I also find EW difficult.

    Since everyone else has already thrown in their .02 about where the markets are headed from a technical standpoint, I thought I'd do something different.

    Today I wrote a post on Sector Rotation in which the leading sectors in the market indicate where the economy lies in its current cycle.

    From what I can tell, we've already put in the market bottom, and are starting (according to sector rotation, this is NOT my opinion, nor is it backed by any tchnical analysis that I've done) to see economic recovery. I saw this because Consumer Cyclicals and Technology are leading the markets right now. If we continue to see tech lead the way, and start to see the Industrial / Energy sectors leading the markets within the next 6 to 12 months, it should be pretty clear we are in a new bull market.

  69. Rofs Says:

    This is a great article, Corey. Thank you for the insight and
    showing different scenarios. Do you have any updates by chance?

  70. Rofs Says:

    This is a great article, Corey. Thank you for the insight and
    showing different scenarios. Do you have any updates by chance?

  71. MGD Says:

    Hi Corey, it would be very interesting to hear your opnion abt these counts after all we have seen in 2009 and 2010. Is this a new bull market or is it a w4 correction ??…what do you think ?…

  72. Peter2226 Says:

    so far count #2 has been proved unvalid, as correction traveled past wave 1(circle), count #3 also is unvalid… Count #1 is ok, but sligtly unlikely, there is more counts that can be viably interprted

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  75. Callmeishmael33141 Says:

    Interesting but dated.

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  95. The_Green_Prince Says:

    Corey now that it has been almost 3yrs later since you posted these various counts, have you decided yet on which one would be the correct interpretation?

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