Can S&P 500 Still Target 4800?
Already in early August, see here, we warned that per the Elliott Wave Principle (EWP) a major top could be forming for the S&P 500. We followed up on our forecast regularly, with the market throwing the obligatory and occasional curve ball. But by the end of October, the index had lost 11%. Three weeks ago, see here, we found a reversal was likely and:
«The Bulls have one last chance to reach $4800, as long as $4100 is not breached. A corrective pullback in the EWP analysis always takes shape as an a-b-c structure, wherein the W-a comprises three or five waves, whereas the c-wave encompasses primarily five waves. Therefore, because the initial decline from the July $4607 high into the August $4335 low counts best as three waves, it suggests this is an a-b-c corrective pullback. It sets the index up for a rally to ideally $4800 when the pullback completes. However, only one (!) type of pattern can start as a three-wave move and will still complete a full five waves: the „dreaded“ diagonal.»
Fast forward, and the index bottomed at $4103 on October 27 and staged a strong enough rally to produce a Zweig Breadth Thrust. Thus, so far, the Bulls stick saved it by three dollars (4100 vs 4103) But is it enough? Allow me to explain using Figures 1 and 2 below.
Figure 1. Daily SPX chart with detailed EWP count and technical indicators
The second option, Figure 2, follows a similar path, but the leading diagonal (black W-1) bottomed out in October, and a counter-trend rally (black W-2) is now underway. As we learned, counter-trend moves, aka corrections, comprise three waves, and in this case, based on the short-term EWP count (See Figure 3), we anticipated the five-wave red W-a to wrap up shortly after which a brief, multi-day
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