S&P 500 Wave 2 Correction From Recent Highs. Updated 7/16/25 and 12/9/25.

 

The S&P 500 has most likely started the Wave 2 Correction and appears to have seen the start with the  12/6/24 and 1/24/25 double top that was tested on Friday: If wave 2 is more of a drawn out time correction then it should be a fairly mild price correction as was stated in the September tweet, perhaps 1/3 of wave 1(yellow arrow on chart), and it may last through much of 2025. Otherwise a shorter term wave 2 may only last up to about 3-4 months and correct up to about 50% to 62% of wave 1(orange arrow) up from the October/2022 low. Either way, my view is that the low of wave 2 is in sight in 2025. I'll be watching for any indications that this outlook is wrong. Update 7/16/25: As has been seen wave 2 ended at the early April lows. S&P 500 may be near the high of the year but it may not be the high of wave 3 - it may be just a correction along the way. Update 12/09/25: The correction along the way came from a higher level in September to November and was mild as expected. Another move up to higher highs in early 2026 could complete 5 waves up from 2009. A topping process could also develop into 2027 or early 2028. That process could produce limited new highs. A parabolic or blowoff top I think would be a lower probability. Either way I will be avoiding this market.

S&P 500 long term trendline within reach

The SP500 strength may indicate that it wants to reach the 11 decade trendline(red dotted line) sooner rather than later instead of later rather than sooner. The gold arrows show possible paths for each count. It is also possible that both wave 1 of 5 and wave 5 of 5 hit that trendline.

 

Stock Market Update 6/4/23, Updated 8/19/23, 3/11/24

 

Biweekly chart of the Vanguard 500 Index Fund ETF as of 6/4/23. The October/2022 stock market low should be the final low and the current market is showing signs of wanting to melt up. I would not be surprised to see a test of the all-time highs sooner rather than later... Possibly even July to September. The blue line shows a possible track of my favored count based on estimated wave relationships. Primary wave 1 of cycle wave 5 is shown as a surmised high around August. Update, 8/19/23: The recent decline has not changed my view...still looking for the January/2022 high to be reached or exceeded by the end of 2023 or January/2024. Update 3/11/24: The major US stock indexes look to be at or near the 2024 highs with a possible secondary high by mid-year. The Dow Industrials peaked on 2/26/24.

Barclays 20+ year treasury bond index looks to be completing a five-wave pattern to the downside

The TLT etf which tracks the Barclays 20+ year treasury bond index looks to be completing a five-wave expanding diagonal pattern to the downside on the monthly charts as shown by the blue labeling. It has a current dividend yield of 1.90%.

The 5th wave has had a run down close to the lower trendline but has not reached it. 5th waves in an expanding diagonal usually end before hitting that trendline so the 5th wave may be complete or very close to complete.

With that completed 5th wave count, if it is making a zigzag, wave b has an average retracement of wave a of 58% which is at 149.8. The range of that average retracement is within 20% which equates to 136-164. The 58% retracement level is shown on the chart below at letter b on the yellow labeling. The green trendline looks like a good place to put a price target and that trendline reaches the 58% retracement level around January of 2028. It hits the 136 level around January/2025 and the 164 level around January/2031. That makes for a six year time span, 2025-2031 to watch for that trendline to be reached by wave b.

Quarterly chart of iShares 20+ year treasury bond etf(TLT). Click to enlarge.

Eli Lilly Cycle Wave 3

LLY is in primary wave 3 of cycle wave 3 on the monthly chart. Wave 3 is usually the longest wave although the below chart shows a shorter wave 3 projection. This is shown below with wave 3 topping around 380 with the current price near 315.

Eli Lilly monthly chart. Primary count is orange labeling. Cycle count is blue labeling. Click to enlarge.

Bullish Counts on the DBC Commodities ETF

There are multiple ways for bullish counts on the DBC commodities ETF bi-weekly chart. One of these would place the wave 2 low at last November's low with wave 3 now in progress. 

The least bullish count is shown below with wave 1 topping on March 8th. Wave 2 would probably bottom later in 2022 perhaps at wave 4 of one lower degree shown by the aqua horizontal line. Wave 3 would then go to significantly higher levels from that low.

Bi-weekly chart of DBC commodities ETF (symbol DBC)

Centerra Gold is in a long term wave 3

Centerra Gold (CGAU) is in a long-term wave 3 as I see it. A seven year wave 1 ended in 2020 followed by a 13 month wave 2. If wave 3 is as long as wave 1, wave 3 would reach 35.68. Wave 3 is usually longer then wave 1 but it can be shorter. See chart below.

 

Bi-monthly chart of Centerra Gold showing long term counts.

Potential Five Waves Up on Nasdaq Composite index UPDATED 7/7/21

 (updated 7/7/21 - see bottom of post)

The Nasdaq Composite index potentially completed five waves up at last weeks high. 

An alternate count would allow one more 5th wave up above last weeks high in the coming days or weeks.

A decline from last weeks high could drop .382 which would be just above the September/2020 low. This is shown by the top orange line on the below chart.  Another likely support area is at the .50 retracement which is above the middle of wave one up from the March/2020 low(lower orange line).

Weekly chart of Nasdaq Composite index. The .382 and .50 possible support areas for the correction down are show by the orange lines(click to enlarge).

Update 7/7/21:

The alternate count from the 5/6 post is now the best count. That indicates that it is now in a higher level 5th wave. The 7/2 Russell 2000 post stated that the Russell 2000 fifth wave high may occur around August so that may apply to the other indexes as well including the Nasdaq Composite.

 

Weekly chart of Nasdaq Composite Index (click to enlarge)

Stock Market Top is in Site (Updated 12/27/20: Chart Added)

Wave Commentary For Stocks:

(For chart update see bottom of this post)

Review

• The last post in May suggested that the February/2020 top would be tested or exceeded. That high was exceeded in August and the market is continuing to go higher as of this writing.
• It was suggested previously that the B Wave of a flat or triangle was in progress from the March low. That has been updated - see below.
• It was anticipated that the March low would be the low of the year. That was correct. 

Wave Counts and Structure

• The market as shown by the S&P500, may be forming a diagonal five wave structure from the March/2020 low. That appears now to be a better count rather then the B wave of a flat or triangle as described previously. They have not been ruled out however.     
• If a diagonal five wave structure is the correct count, it is not clear if it would be a leading or an ending diagonal, however I am leaning toward the more bullish view at this time. A leading diagonal would be much more bullish then an ending diagonal which in a worst case scenerio could be the end of the entire move up from March/2009.

Wave and Cyclical Outlook

• I have spotted a longer term sub cycle that has a peak in the early Spring. It has a tendency to bring tops so that syncs well with this outlook. 
• There are no more bullish cycles this year so if a top is made around March it could be the high for the year.

Weekly chart of S&P500 showing projected wave count as described 
in above commentary. Wave 5 top is projected around March/2021 as shown.
(click to enlarge)

Two bullish possibilities for the US stock market, Updated 6/24/22 & 6/25/22

The correction since January has brought forth a new wave count possibility for the SPX index. The original cycle wave 4 count is still valid. The extent of the correction has introduced the possibility that a larger degree wave 4 has formed instead (see note on side panel). 

Based on other indicators I study as well as EW, if the original cycle wave 4 count is still in force, then cycle wave 5 may be sharper in nature and could top within the next several months or by eoy 2022. Otherwise, if the supercycle degree wave 4 is in force, wave 5 may be more gradual and may not top until 2023-2024. With that count it would also be possible that supercycle wave 4 is not over as wave 4's tend to be sideways in nature. With that then the most recent May 20th low could be wave A of supercycle wave 4 followed be multiple waves which form that sideways count over a similar or shorter time scale. 

In any of the above scenarios, I believe the low of either wave 4 possibility has been made. Any drop below that low should be mild or brief. 

Update 6/24/22: 

The cycle degree wave 4 count as given previously is not looking like a likely resolution which now makes the supercycle degree wave 4 the best count. While the S&P500 cycle wave 4 has not overlapped with cycle wave 2, that did occur late last week on the CRSP US Total Market Index which is a main reason for the above change. 

This does not change the supercycle degree wave 4 comments as given in the original 6/8/22 post shown above.

A lessor possibility is that the move up from the 2020 low to the 2022 high is a supercycle degree wave 5 (instead of sd wave 3). If so, It could be cd wave 1 of sd wave 5 and it may form an ending diagonal pattern with overlapping waves that count better as 3's rather than 5's. That type of formation would also be possible if sd wave 4 ended at the recent low.

Update 6/25/22:

As mentioned above, sd wave 5 could form an ending diagonal EW pattern. With that the initial cd wave 1 is the strongest and fastest wave if it is contracting - contracting is more common than expanding. This is shown in the 2nd chart below.

Monthly S&P 500 futures chart showing cycle degree wave count (purple labeling) and supercycle degree count (orange labeling). Click to enlarge.

Update 6/25/22: Bi-monthly S&P 500 futures chart showing supercycle degree wave 5 as a contracting diagonal (blue labeling).