S&P 500 Still On Track for SPX 4300+

Last week, see here, I showed how, IMHO, the S&P500 was in an ending diagonal (ED) 5th wave. Please read the Elliott Wave Principle (EWP) to learn what an ED, among many other price patterns, is. Using the hourly chart, I was still looking for SPX4315-4375 after the post-FED meeting dip earlier this month. This week I would like to zoom out and “dissect” the rally since the infamous March 2020 low. See figure 1 below.

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

The rally since March 2020 is still unfolding and has more room to run.

The beauty of the EWP is that in an impulse move, one knows with certainty after the third wave follows a 4th wave lower and then a final fifth wave higher. From the March 2020 low, I can count five (red i, ii, iii, iv, and v) waves higher into the June 2020 high for a (black) major wave-1. The 2nd low later that month was major wave-2, the August 2020 high the one-degree lower (red) intermediate wave-i of major-3, etc. Based on historical evidence, we know 3rd waves typically reach the 1.382 to 1.618x Fibonacci-extension of the 1st wave, measured from the 2nd waves low.

This is all “textbook,” but the market can do anything. Thus we only have an anticipated road map, which needs to be tracked daily to see if the index makes a detour, short-cut, or takes the scenic route. When the market departs, nobody knows which exact route it will take, but we have a reasonable expectation, i.e. a blueprint.

Major wave-3 should thus ideally target SPX4442-4682, but for now, the index is in (red) intermediate wave-iii of 3, and thus an intermediate wave-iv and v are still to be expected. Wave-iii targets ideally SPX4289-4442, which fits very well with the SPX4315-4375 target zone found using the hourly chart (see my previous post). Wave-iv should then ideally drop back to around SPX3940-4040, but please remember that upside surprises and downside disappoints in Bull markets. Wave-v of wave-3 should rally the index to SPX4442-4682.

Thus, short term, I am still looking for marginally higher prices, followed by a retest of the May lows before the next rally to dazzling new all-time highs starts to complete major-3. After that, I expect a multi-month major wave-4.

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