There are always alternate Elliott wave counts. There’s no predestination in the markets and traders need to be aware the various paths a market could take. The prime wave count for the S&P 500 (SPX) from the 03/23/20 bottom has been that an Elliott wave series of “one’s” and “two’s” up formed between March to June 2020. Please see the blog “S&P 500 – Elliott Wave Count 07-09-21”. While this is still a possible wave count, there is an alternative count that explains why a major SPX peak may have been made on 09/02/21.
The monthly SPX chart courtesy of Trading View illustrates the long-term Elliott wave count since the March 2009 major bottom.
There’s usually a Fibonacci relationship between waves “one” and “five” and when measuring large percentage gain movements, it’s usually better to examine growth percentages rather than point gains.
The supposed Primary wave “1” – boxed from the March 2009 bottom had a growth rate of 82.9%. This growth rate is the starting point to determining the termination point of Primary wave “5”.
The daily SPX chart 2019 to 2021 illustrates the alternate Elliott wave count.
This count has an Elliott wave – Horizontal Triangle – Primary wave “4” from the February 2020 peak to the late October 2020 bottom.
Sometimes the calculations for the subsequent move after a Horizontal Triangle can be made in the wave “A” position. In this case the 03/23/20 bottom. Most of the time the calculations are made at the termination point of wave “E”. In this case the 10/30/20 bottom.
Taking the 82.9% growth of Primary wave “1” and multiplying it by the Fibonacci ratio of .50 yields a growth rate of 41.45%, from the 10/30/20 bottom of 3233.94 this targets SPX 4574.40. The all-time high so far is 4545.85. Considering the time and growth since Primary wave “1” the 28.55-point difference is within leeway of the bullseye target. However, a case can also be made that greater precision could still be achieved. If the current decline continues into September or October, it could be just a correction within an ongoing bull market. We need to stay alert to this possibility.
As for the current decline, evidence continues to mount that there’s a high probability of lower prices coming very soon.
The daily SPX chart June to September 2021 focuses on bearish momentum signals.
The RSI reading on 09/10/21 was below the reading made a the lower 08/19/21 bottom, this forecasts price could soon be trading at the 08/19/21 level. Daily RSI + MA, Stochastic, and MACD all have bearish crossovers.
Also note the SPX on 09/10/21 bottomed at the rising trendline connecting the 07/19/21 and 08/19/21 bottoms. If there’s a break below this line it could trigger a sharp and deep drop.
Traders are short 150% non-leveraged SPX related funds. Continue holding short.
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