S&P 500 Pulls Back As Expected: Rally Time?

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Already in June (see ) I alerted to a potential bullish wedge pattern forming that would target 4300+ on the (SPX). Last week the SPX topped at 4325, and I , using the Elliott Wave Principle (EWP) for the bullish option I am tracking, that the index

should ideally bottom between 4185-4095 (the green target zone; a typical 23.60-38.20% retrace of green wave-3) and then rally ideally to 4435-4525 for (green) wave-5 of (red) wave-i.

Currently, the SPX is trading at the low-4100s. So far, so good. Does that mean the correction is over? The hourly chart below shows more detail.

S&P 500 1-Hour Chart

Figure 1. S&P 500 hourly chart with detailed EWP count and several technical indicators

Using this EWP option on the hourly chart, I found:

  • The SPX most likely completed five waves lower into this week’s low (grey wave-a)
  • Then, it bounced to the lower end (38.20%) retrace of the prior decline (grey wave-b), which was a bit lower than the expected -more common- 50-62%
  • Now it is trading at the lower end of the ideal target zone laid out last week (grey wave-c).

Given that the b-wave rally into today’s high was slightly shorter than anticipated (sorry, I cannot know everything to the T beforehand), the c-wave may reach as low as 4022-4033.

So, the Bullish count remains on track, and I have updated the EWP count that we are completing the c-wave of wave 4. But please remember, although there are now enough waves in place from the recent 4325 high to suggest the correction is close to complete, 4th waves can take many surprising twists and turns. So, the bulls are not out of the woods just yet.

Regardless, I do not want to see the index move below 3950 (red dotted arrow), as that would increase the odds this potential setup is not unfolding and places the market in the more  EWP count again.