Technical Analysis
S&P 500 — Elliott Wave and Fibonacci Price Update
Introduction:
The trajectory of the S&P 500 index is of utmost importance for investors across markets, influencing investment strategies and risk management. This technical analysis utilizes Elliott Wave Theory and Fibonacci techniques to navigate the forecast for S&P 500 Futures, providing insights into the potential path for investors in this dynamic landscape.
Long-term Perspective:
S&P 500 Future — 1week Chart
Examining the multi-year view on a weekly chart suggests that the S&P 500 Futures achieved a cyclical wave 3 peak at 4808 in January 2022, concluding a decade-long lower-degree 5-wave cycle originating in March 2009. The subsequent price action indicates an expanding ABC Flat counter-move, marking the commencement of an eventual wave 4 correction from the 2022 peak. The anticipated confirmation involves triggering the green 4808 level, instigating an overshooting wave (B) into the green target box. It's noteworthy that neither wave (B) nor wave (C) unfolds in a single straight advancement but in fluctuating and oscillating structures.
Fundamental Implications:
The current ascent in the overshooting wave (B) is propelled by augmented corporate earnings, spurred by pandemic-induced liquidity injections worldwide. This final surge will eventually taper as excess consumer liquidity depletes, prompting spending adjustments and potential demands for higher wages. Both trends are expected to impact corporate earnings, slow economic activity, and trigger the corrective wave (C) contraction. Resolution may occur through significant Federal Reserve interventions and/or advancements in productivity, possibly driven by emerging technologies like artificial intelligence.
Short-Term Analysis:
S&P 500 Future — 8h Chart
A closer look at an 8-hour chart reveals two plausible wave counts for the 2022 index contraction. Both scenarios lead to nearly identical early price targets for the ongoing wave (B) expansion. The optimistic count assumes a truncated WXWYZ double zigzag, terminating in March 2023. If correct, the current robust wave (3) could be an impulsive five-wave move reaching its first resistance around the 5120 level. In this scenario, a brief wave (4) correction might precede a surge into the 5400 region and beyond. Prudent investment strategies are advised as the market might exhibit volatility impacting investor sentiment across various markets.
Investment Considerations:
Since the previous March 21 forecast update, the S&P 500 Futures have peaked along their projected path in the Green longer term target box, completing a lower several lower degree impulses on March 31 at 5333.50 mark. Now a corrective move is in progress but it is still too early to qualify this as a trend reversal versus a lower degree correction that could be followed by yet another retest of the March 31 heights.
I am looking at the following short-term triggers and targets for a true trend reversal:
Trigger #1 5235.00 (activated)
Trigger #2 5191.00 (activated)
Trigger #3 5060.00
Target #1 5210.00 (achieved)
Target #2 5183.25 (achieved)
Target #3 5169.25
Target #4 5149.25
Target #5 5050.50
When is the proposed assumption of an unfolding trend reversal wrong?
If in the coming days the S&P 500 Futures price action reverses and surpasses the 5308.50 MOB (Make-Or-Break) level to the upside, the technical analysis requirements for a valid trend reversal are not met. We would have experienced yet another correction and the index is destined to continue further upwards towards the upper range of our Green target box.
However, reaching the upper end of the green target zone requires astute risk management. Anticipate a potentially turbulent market, which could also affect investor confidence in other sectors, such as real estate. With limited upside potential in the coming weeks, it's recommended to practice prudent money management and use risk-off techniques until clearer triggers emerge.
Alternative Scenario:
The alternative white wave count posits the completion of the initial wave (A) correction in June 2022, framing the current upward move as a corrective phase within a larger white WXY formation. This alternative wave (B) could conclude in the low 5120 level (green box) with restricted upside potential. Under this scenario, the larger and swifter wave (C) downward move might commence earlier, potentially around the end of March or early April 2024. New price targets would be communicated, possibly surpassing the previous low point.
Both scenarios appear equally plausible, especially considering the upcoming presidential election aftermath. Therefore, a significant probability, possibly exceeding 45%, is assigned to the alternative scenario. Investors are advised to remain vigilant and adapt strategies based on emerging market dynamics.
Wave Table
Pivot:
4808
My Preference:
Exercise risk-off prudence in the coming days and weeks, and seek confirmation of an expected corrective pattern before exiting existing investments and committing further capital to the market.
Alternative Scenario:
Below 4629 look for further downside below 4000 with new targets to be announced in the next update.
Comment:
Oscillator indicators are not yet indicating trend reversal divergence on the lower time frames.
Trend Reversal Zone (TRZ):
TRZ1 5120 (achieved)
TRZ2 5400
TRZ3 5900
Price Targets Alternative Scenario (Resistance Levels):
R1 5125
R2 5291
R3 5530
Price Targets Alternative Scenario (Support Levels):
S1 4808
S2 4629
S3 tbd
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