S&P 500 Could be Basing For a Year End Rally

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.