The 04/26/21 blog “Struggling to Rally” speculated that the Consumers Staples Fund (XLP) had completed an Elliott five – wave impulse pattern from the 03/23/20 bottom. Subsequently XLP moved to a new all-time high and peaked on 06/04/21.
The daily chart courtesy of Trading View illustrates the updated Elliott wave count.
Usually within motive waves there’s a Fibonacci relationship between waves “one” and “five”, in this case Intermediate wave (5) is .666 or 2/3 of Intermediate wave (1). The decline from the 06/04/21 top is currently ambiguous. The move down – 06/22/21 to 06/24/21 looks like a fifth wave, however the low on 06/24 is slightly above the 06/21/21 bottom. This could be a truncated fifth wave down or the 06/21/21 low completed a Zigzag corrective pattern.
At some point the situation will be resolved with either the XLP making a new high or breaking below the 06/21/bottom
The wave count and Fibonacci relationship of waves (1) and (5) favors a break below the 06/21/21 bottom.
The daily XLP chart 02/08/21 to 07/02/21 illustrates the complex subdivisions of Intermediate wave (5).
With the S&P 500 and Nasdaq Composite making new all-time highs, XLP could be an important indicator. If XLP fails to make a new high, it would add to the already significant evidence that US stocks could be forming a major top.
The next blog will update internal momentum indicators and forecast potential S&P 500 resistance.