Several blogs have illustrated that the SPDR Consumer Staples fund – (XLP) since March 2020 has a clear Elliott wave pattern. The most recent post was 07/03/21 “Consumer Staples Fund – Update July 2021” and noted that XLP could have completed an Elliott five-wave impulse pattern from March 2020 to June 2021.
Subsequent to the June high there was a shallow decline followed by a rally to a new high. Usually within Elliott Impulse patterns one of the three sub motive waves ( one, three, and five) could have an extension – where a five -wave impulse is visible within the sub wave. For stocks extensions usually occur within the third of a third wave position. For XLP the extension is in the suppose Minor wave “5” of Intermediate wave (3).
The weekly chart courtesy of Trading View Illustrates the developing Impulse wave.
If the wave count is correct XLP is currently in Intermediate wave (5) of an impulse wave that began in March 2020. There’s usually a Fibonacci relationship between waves “one” and “five” of impulse patterns. Also, when there’s a large percentage gain its more appropriate to compare growth rates.
Intermediate wave (1) had a growth rate of 27.36% multiplied by the Fibonacci ratio of .382 yields a growth rate of 10.45%. A growth rate of 10.45% from the supposed Intermediate wave (4) bottom of 68.32 targets XLP 75.46 as the potential termination point for Intermediate wave (5).
The rising trend line from the September 2020 peak crosses the Fibonacci resistance point in mid – December 2021. This ties in with the time cycle analysis presented in the 10/24/21 blog “Possible US Stock Market Top – December 2021.”