In June, I to a potential bullish wedge pattern forming that would target 4300+ on the . Two weeks ago, the SPX topped at 4325. Then, last week I concluded, using the Elliott Wave Principle (EWP), “the bulls are not out of the woods just yet. I do not want to see the index move below 3950 … as that would increase the odds this potential [bullish] setup is not unfolding and places the market in the more bearish EWP count again.”
Yesterday, the index dropped to SPX 3903 and, thus, the potential bullish EWP count (impulse higher) I was tracking got invalidated. The bearish options are back on the table. The invalidation strengthens the case for a prolonged bear market I already outlined in .
Starting with Figure 1, the bulls would want to rally the index back above last week’s low (SPX 4120), as that will lock in the (red) a-b-c pattern, as already shared in early . Then, we should expect the black c-wave to ideally around SPX 4550 to complete (blue) Primary-B.
Figure 1. S&P 500 daily chart with detailed EWP count and several technical indicators:
S&P 500 Daily Chart.
Given the stock market is probabilistic, and if the SPX is indeed in a multi-year bear market, then due to the increasing overlap in price (big swings up and down), the exact future path will be harder to know beforehand. Thus, stay on your toes even more than usual. One course is presented in Figure 2 below.
Figure 2. S&P 500 daily chart with detailed EWP count and several technical indicators:
S&P 500 Daily Chart.
Namely, one can assess the current price action as a (rare) expanding leading diagonal: (black) major wave-a. It means the SPX should now be in (grey) minute wave-iv, followed by wave-v to complete (green) minor wave-1. Minor waves 2, 3, 4 and 5 should then follow as shown. As shown for the NDX .
For now, the focus is on the grey path and if the bulls can push the SPX back above $4,120 or not. If they can, the EWP option shown in Figure 1 is operable. If they cannot, and the bears manage an impulse lower from the August high, the path shown in Figure 2 becomes the preferred option.