Is S&P 500 Still On Target For 4300+?
Dr. Arnout ter Schure | Aug 09, 2022 03:40PM ET
In June (see here), I warned of a potential bullish wedge pattern on the S&P500 (SPX) targeting 4300+. I followed up on that analysis a month later (see here) as the index confirmed the pattern by breaking out. The upside target remains ideally at SPX4365-4530:
“a 62-76% retrace of the entire Year-To-Date Decline … if the current six-month-long diagonal pattern completes, I expect the rally to last longer than a few weeks.”
Yesterday, the index reached SPX4187, only 4.1% below the lower end of the already June projected upside target. So far, so good, but does this mean the counter-trend rally is over and a new bear market leg down has started?
Figure 1 below shows the bearish Elliott Wave Principle (EWP) option I am tracking alongside a bullish one (not pictured).
Despite a smaller 4th and 5th wave pattern higher, SPX4250+ cannot be ruled out just yet because a-waves can be either made up of three or five waves. Therefore, the index can have complete (black, major) wave-a of a larger (blue, Primary) wave-B bounce.
B-waves always comprise only three waves: a-b-c. And while the index may have already completed a wave B, the recent breadth thrusts (see here and here) suggest odds favor more upside.
Per this bearish EWP count, I am looking for a multi-day, overlapping pullback to the ideal lower black, boxed target zone (SPX3900+/-100).
The next leg should kick off to around SPX4350, but possibly as high as SPX4500-4600 (the higher black, boxed target zone). Please note that the vertical lines represent time symmetry; it took 114 days from top to bottom, and I, therefore, expect this potential bounce only to last longer than the current two months.
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