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Recent “Sell The S&P500 Signal” Was Only a Brief Dip: SPX4300+ Still Possible

Last week, see here, I shared my S&P500 (SPX) “Buy/Sell” indicator, which had switched to a “Sell the SPX” on June 16. The index dropped another 45p to as low as SPX4166 on Friday, June 18, but has now moved back to new all-time highs. Hence, the sell signal was correct, but my expectation the index would reach “SPX4050+/-50 before the next rally to new ATHs starts” was not entirely accurate as the SPX4166 low was too shallow.

Hence, based on the Elliott Wave Principle (EWP), I view the index as still being able to each SPX4315+/-5 because last week’s “dip” was most likely on a smaller 4th wave (grey wave-iv) of a more significant 5th wave (green wave-5 of red wave-v). See Figure 1 below.

Figure 1. S&P500 hourly chart with detailed EWP count and technical indicators

The rally since the early May low is still unfolding

Over a month ago, see here, I was looking for the index to rally to ideally SPX4315 +/- 5 for what I labeled as (green) minor-5. Back then, I had no idea how that rally would unfold, but with the new ATHs this week, I find it is turning into an ending diagonal (ED) in EWP terms. EDs are typical for 5th waves and are messy: it is all three waves instead of five, with lots of overlap. The rally from mid-May to last week’s high exemplifies this “mess”: the general trend is higher, but there are many back-and-forths daily. Of course, diagonals can always tack on another wave (while remaining diagonals), which is what happened last week as I thought the ED had ended. It sure could have, but the proportions of the smaller (grey) minute waves of the larger (green) minor waves are now with the recent rally much better and allow for the index to ideally reach SPX4315+/-5.

It will take a break below last week’s SPX4166 low from current levels to tell us the trip to SPX4050 has started. On the other hand, the index will need to break out above SPX4375 to suggest something much more Bullish is unfolding. For now, neither is my preferred POV.

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