S&P 500 Update: Is Pullback to Around 3800 Complete?
Dr. Arnout ter Schure | Dec 22, 2022 03:01PM ET
Over the last several weeks, we have been expecting the S&P 500 (SPX) to find a bottom around $3800+/-100 according to the Elliott Wave Principle (EWP). Although we did not get every twist and turn correctly, which is an impossible task, one can browse through each article's link to the previous article to see what we were looking for the week prior. For example, last week, see here, we found:
"… we can narrow down the ideal target zone for all of the anticipated black W-b. From last week's "$3730-3870" to ideally $3840-3860, assuming the market will follow the ideal Fibonacci-based impulse pattern as shown by the green and grey target zones in Figure 1. Once more price data becomes available, we can narrow this target zone even further."
Fast-forward to today, and the index is currently trading at $3765. Thus my primary expectation for a continued move lower was validated. However, the SPX decided not to follow an ideal Fibonacci-based impulse pattern but to extend the waves. Are, as D. Rumsled would say, "a known unknown." Albeit the index is only 1.9% below the W-5 target zone of this perfect pattern, we must thus adjust and narrow it down a little bit more. See Figure 1 below.
In the hourly chart above, we were already tracking the five sub-waves of the red W-c of black W-b last week. Why five waves? Because of the C-wave of a flat correction. The internal structure of a flat is a-b-c which in turn is a 3-3-5 pattern. Here green W-3 bottomed at $3795, yesterday's high was green W-4, and now green W-5 is underway with an ideal target zone of $3725-3755. Today's low, so far, is $3764.
Thus, as said two weeks ago:
"Once the $3800+/-70 zone is reached, …, we must entertain the notion all of black W-b has already bottomed out. The index will have to move below $3635 (the 76.40% retrace of the October 13 - December 1 rally), with the first warning below $3725, to start to suggest there will not be a more significant C-wave rally to $4300+." In addition, last week, we "shifted the timing of the low to preferably mid next week."
So far, so good. Besides, the famous Santa Rally is the last five trading days in December and the first two trading days in the following January. With the US stock markets closed on 12/26 and 01/02 in observance of Christmas and New Year, the window of opportunity for a Santa Rally will officially open tomorrow and end on January 4. When combining these facts with the EWP count, we have been tracking over the last few weeks; it is prudent to conclude that a sustained bottom could be close.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.