The S&P 500 (SPX) could be forming an Elliott wave – Horizontal Triangle. If so, after its completion the SPX could have surge up in the last week of 2021 to the mid-4800 area.
Horizontal Triangles appear only in the fourth wave positions of motive patterns, and in the “B” or “X” wave positions of corrective patterns. Horizontal Triangles move sideways and are composed of five-sub wave. Each sub-wave divides into a three wave or a combination of three wave patterns. After completion of a Horizontal Triangle there’s typically a thrust in the direction of the primary trend. For the current supposed SPX – Horizontal Triangle the trust would be up.
The 60- minute SPX chart courtesy of Trading View reveals some fascinating clues.
The 12/07/21 blog “Slow Move Down – Fast Move Up” noted how fast the rally off the SPX 12/03/21 bottom was relative to the 11/22/21 to 12/03/21 decline. Subsequently the rally speed decreased considerably. On 12/16/21 the SPX nearly matched the high made on 11/22/21 in the same number of trading hours as the prior decline. Usually waves “A” and ‘B” within a Horizontal Triangle can have Fibonacci price/time relationships, in this case price and time are near equal.
The supposed Minor wave “B” retraced 95.2% of wave “A” – typically wave “B” in Horizontal Triangles have deep retracements of wave “A.”
Most of the time the subsequent Horizontal Triangles – waves “C,” “D,” and “E” have Fibonacci relationships with the previous alternate sub waves. Example wave “C” could be .618 of wave “A”.
If a Horizontal Triangle is forming, the supposed Minor wave “C” could bottom in the 4580 area. On 12/17/21 the SPX had nearly reached that price zone, therefore the time of wave “C” could be just .382 of the time of Minor wave “A”. This relationship targets “C” wave completing late on 12/20/21 or early 12/21/21.
Typically, the subsequent waves “D” and “E” are much smaller relative to waves (A,B, and C). The Horizontal Triangle could be complete on or near 12/24/21.
The 12/04/21 blog “Choppy Stock Decline” noted the SPX 11/22/21 to 12/03/21 drop appeared to be an Elliott wave – Triple Zigzag. The subsequent rally from 12/03/21 to 12/16/21 has the look of a three – wave formation, in this case a Single Zigzag. The rally from 12/03/21 to 12/10/21 could be wave “A”, the drop into 12/14/21 could be wave “B” , and the rally into the 12/16/21 high as wave “C”.
If within the next few trading days, the SPX breaks below the 12/03/21 bottom it would eliminate the Horizontal Triangle count and open the door for a move down to at least 4350.
A rally in the last week of December 2021 into the 4800 area could set up a great shorting opportunity.