S&P 500 Elliott Wave Analysis – 08 May 2012

A 20 point vertical drop on the S&P 500 from the market start before it recovered back and closed 6 points lower. Another big whip saw day which must have shaken a lot of investors. Looking at the wave counts, the move down from 141 is a clear five wave impulsive move. I did not expect this as the earlier expectation was for the market to head higher as it seemed that Minute wave [x] had completed. I had anticipated a small leg down and what we got was a big one.

This move needs an updated labelling. I believe that it is a large flat that has formed and I have updated the count with a Subminuette w-x-y to complete Minute [x]. If this count is correct, we should see the market heading higher from here as it embarks on Minute [z]. Note that the S&P 500 recovered strongly from the red support line. But, it would need to put in another strong up wave in the next session to confirm that the bulls are in charge once again.

The alternate count is that this move down has now formed a 1-2-i-ii scenario. This is a bearish scenario and indicates that the stock market trend has turned down. If the red support line breaks, it is very likely that the next stop is around 1290 region.

S&P 500 Fibonacci Confluence

The S&P 500 hit the  Fibonacci level at 1348 and recovered strongly from there and stopped at the 1362 Fibonacci level.

S&P 500 Volume and MACD

There is a marginal hike in volume but overall it is still very thin volume. The daily MACD is getting more negative.