S&P 500’s Rally to $4300+ Is Still on Track

Dr. Arnout Ter Schure
Published: Feb 3, 2023, 19:29 GMT+00:00

The index should bottom at around $4100 before moving higher to about $4260.

Wall Street, FX Empire

In this article:

The Expected First Rally Has Completed

Using the Elliott Wave Principle (EWP), our primary expectation for the S&P500 (SPX) has been for months for a rally to the $4300-4500 region. As such, early last week, we posted

The last low-risk chance will be a pullback to around $3940+/-20 from a top at around $4060+/-20. And unless the index breaks back below last week’s low, with a first warning below $3920, we continue to see no reason for this Bull run not to unfold.”

The SPX topped that day at $4040 and bottomed two days later at $3949. It traded yesterday to as high as $4195. See Figure 1 below. Thus, with the EWP as our guide, we could again foresee where the index would top and bottom.

How can we foresee these market tops and bottoms well ahead of time? Price is the aggregate of every trader and investor’s opinion at any given time. Most of them have far larger pockets than any of us; thus, their opinion matters much more. Besides, one’s single opinion matters little in a sea of millions.

There is, therefore, no need to have an opinion about the stock market. It will cloud one’s judgment. Follow the index’s price and set of well-document patterns via the EWP, and you will know most of the time what the stock market will do next. That is the secret sauce.

Figure 1.

The Primary Focus Is $4400

From the EWP, we know that third waves within an impulse typically reach the 161.80% Fibonacci extension of the length of the 1st wave, measured from the 2nd wave low. In this case, we focus on the green W-1, 2, 3, 4, and 5 of red W-iii. Green W-1 already topped last week when we wrote our previous article, and, as said, green W-2 bottomed two days later.

Thus, green W-3 should then reach $4199 ideally (see Figure 1 above). With yesterday’s high at $4195, the index came very close and has done enough to consider the green W-3 complete. Today’s decline may only be a minor 4th wave of W-3 (W-iv), but there are now enough scribbles to consider W-3 complete. Thus, in the short term, expect some choppiness and downside before the next rally, green W-5, kicks in to ideally $4260+/-10.

From a more technical perspective, we can see the index trade almost entirely outside the light-green Bollinger Bands yesterday. It means the upside move has strength, classic for a 3rd of a 3rd wave, but it also went too fast, and the index needs to move back inside the bands. 4th waves often do that. The current setup is similar to that of late July last year.

Besides, the SPX is holding the breakout above the orange downtrend line, and it is above the rising 20-day Simple Moving Average (20d SMA), which is above the increasing 50d SMA, which in turn is now also above the 200d SMA. That is a Bullish setup, and the Bullish EWP count is our primary expectation.

Bottom Line

Our primary expectation from September last year for a rally to SPX4400 continues to be on track. Moreover, as expected eleven days ago, the index topped and bottomed precisely where we anticipated it would go for a smaller 1st and 2nd wave: $4440 vs. $4460+/-20 and $3949 vs. $3940+/-20, respectively. It reached the ideal 3rd wave level yesterday: $4195 vs. 4199. Thus, the index should now be in a minor 4th wave to ideally $4100+/-10 before a 5th wave targets $4260+/-20.

From there, we anticipate a multi-week correction before the index can rally to ideally $4395+/-25. One cannot foresee every market move, but with the Elliott Wave Principle on one’s side, one is often several steps ahead of the masses, translating to serious profits for those who subscribe to my premium Major Markets Forecasting service. The index will have to break below Monday’s low at $4015 with a first warning at $4039 to tell us the Bullish path is in jeopardy.

About the Author

Dr. Ter Schure founded Intelligent Investing, LLC where he provides detailed daily updates to individuals and private funds on the US markets, Metals & Miners, USD,and Crypto Currencies

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