S&P500 Update: The Dreaded “final stab lower” Came. What’s Next?

S&P 500 Elliot Wave Analysis

Over the last month, I have been tracking how the ongoing correction in the S&P500 (SPX) should unfold using the Elliott Wave Principle (EWP). Back then, based on the available price data, I started with,

“a bounce to SPX4500+/-25 soon from where the subsequent decline to ideally SPX4150+/-25 can start. Once that target zone is reached, the index should bounce again to SPX4315+/-25, followed by a final decrease to SPX4050+/-25.“ Let’s see what happened using Figure 1 below.

Last week, when the index bottomed at SPX4062 I wondered if that was all of green wave-5 or “if the market may have one more trick up its sleeve as that final stab lower – deeper in the ideal SPX3975-4040 target zone- can not yet be excluded just yet.” I concluded, “A move above SPX4308 will be an excellent first sign, with confirmation above SPX4515. If those two levels are reached over the next few days and weeks, the anticipated rally to SPX5500+ has most likely begun.” With the index dropping to as low as SPX3958 today, let’s assess.

Figure 1. SPX daily candlestick chart with detailed EWP count and several technical indicators

The trick the market had up its sleeve

Last week, the FED-induced rally topped out at $4307.66, and the Bulls thus clearly fumbled the ball into the end zone, as they say in American football. Four days later and the index reached the ideal SPX4040-3975 target zone. I had to adjust my EWP count from a green wave-3 and 4 made on April 25 and 28 to May 2^nd and 4^th instead.

These minor adjustments are expected as one cannot get/interpret every market move correctly and why I stated the market could have one more trick up its sleeve. Indeed, as shown in Figure 1, the index has followed the ideal Fibonacci-based EWP-impulse path already laid out a month ago (see here) fairly accurately. I do not know any other tool or method that can accurately and reliably forecast how the markets should move that far in advance. With this knowledge my premium major market members can navigate the markets successfully.

Bottom Line and Forecast

Last week, the Bulls had to clear SPX4308 but failed. The market had indeed the dreaded “one more trick up its sleeve as that final stab lower – deeper in the ideal SPX3975-4040 target zone-“ materialized. At this stage, the index could have a few smaller scribbles left to reach potentially as low as SPX3925+/-5 for a picture-perfect c=a relationship.

Still, per the EWP, it now has done enough waves since the late-March bounce high to consider the entire correction complete. A break back above SPX4160 will be the first warning for the Bears. The 2^nd warning is at SPX4308, and the 3rd and final sign is at SPX4515. When those levels are breached, the next and final run to SPX5500+ should be underway.