5-Year S&P 500 Chart – Target Hit

Elliott Wave Analysis of S&P 500 – 23 June 2012

The stock market has been moving in a very choppy fashion for the past few weeks with a lot of swings that has made analysis very challenging. In times like this, it is better to wait and let the market show us a clear direction. The S&P 500 made a nice zig-zag from the low of 1266 on 04 June to the top of 1361 on 20 June which we can use to decipher the market moves going forward. One of the count that stands out is the 1-2 bearish scenario which is the early phase of Primary wave [C]. I have labelled this as Minor 1 and 2 (in amber). Although this looks like a very likely scenario, I’m inclined to call this as an alternate count. The main reason for this thought is because if indeed the Primary [B] has ended recently, it should have ended in a super bullish tone. But, we have not got to high levels of bullishness yet.

S&P 500 Daily Elliott Wave Chart 23 June 2012

S&P 500 Elliott Wave Analysis Chart 23 June 2012

Note the sudden spike in volume in the last session. Normally this type of spike takes place on an Options Expiry event but there was no such event taking place in the last session. Is the market being supported from falling? If indeed it is being supported, it is likely to result in a bigger drop once the support is removed.

The primary count that I think is most likely panning out is still a corrective Minute [x] to be followed by the super bullish Minute [z]. Right after the zig-zag was completed, the market dropped in what looks like an impulsive five waves with waves 1-2-3-4 completed and next wave 5 is likely to pan out. This tells us that it will be followed by a three wave correction and finally another five waves down. By using Fibonacci projections, we arrive at 1266 as a likely region for this move. I’m of the opinion that that would complete Minute [x] and the S&P 500 would embark on Minute [z] from that level.

It could however develop into something more complex like a triangle. The reason why I say that is because the market is in a confused mode. This is part of a topping process and the market has lost it’s vigour but, each time it tries to drop, it is being supported by the hope that some stimulus or some intervention will appear as a boost to bring it to new levels. The most recent hope was that the leaders of the G20 would help provide further stimulus. The Greece elections has helped to remove the fears on the political front. It is just a matter of time before the reality sets in and replaces hope.