Elliot Wave Update

This post by Daneric40 has been promoted from StockTock Social.

Well turns out that wave 5 peaked yesterday of the second zig zag move from 741 low. Thats the problem with these zig zag moves, the upper portion channels wedgy and can fool you into thinking it has one more wave up. That is why I have learned to go short near the peak of wave 3.

We know it peaked because wave 4 couldn’t breech 884.63 (wave 1 price range). It did and by a mile so the 5 wave move up is over. Downside volume and breadth was not too terrible so its hard to say intermediate wave 4 is over just yet.

So what comes next?

The “Z” wave comes next. It is a second interconnecting waveform, a 3 wave structure (zig zag or flat). The flat moves the SPX sideways and sets up a move too above 920 eventually. The zig zag supports a move down to 818 or so before another rally back to 900 area. I post both scenarios on my charts and chart notes generally explain the moves.

Here are the 2 possibilities:

Option 1.) Todays move down was an unfinished upper half of a 5-3-5 zig zag move down to the lower trading range, 820 SPX just as an estimate. The 3 point gap at 870 would then be closed tomorrow early. Then a retrace B wave (most likely very volatile) and then eventually the second half of the zig zag would play out and another 5 wave move down to the lower 800 area would occur. I have no firm timelines for this all happening but a few days would be likely to finish the move.

A zig zag to the lower trading range 818 or wherever would fit into the giant intermediate wave 4 “triangle” scenario and would represent the “d” leg. I show this scenario on the 60 minute chart provided.

Option 2.) Today’s move can be considered the “A” wave of a 3-3-5 flat of some sort (running, extended or regular). That would suggest SPX traces a strong move back toward 915 area before collapsing back downward probably on an extended flat to close the gap area at 870. But that gap may or may not clsoe on a flat interpretation.

This scenario would support the “ascending triangle” formation and the triple zig zag scenario to a peak somewhere above the 920 area and a flat would be in the “Z” wave position. Then another zig zag up would take out the 920 zone and likely head toward 950 at least.

Which do I favor? I am neutral right now until I see how the early wave moves play out tomorow. If a move down to fill the 870 gap occurs early, I would strongly favor the zig zag scenario and the market heading toward at least 820 by early next week.

But the corrective possibilities are many and I touched on what I feel are the 2 most likely.