S&P500 Update

This is a six month chart of the SP-500. I'm counting the move down from April 2 as a flat(major wave X of primary wave C). This is a potentially good buy point for a 50% or even 100% retracement up(see chart), but as previously stated, we are not out of the woods until late June or mid July when there are negative cycles peaking(that period could now end up being high instead of a low).

S&P500 Wave Count Update

Two week chart of S&P500, click to enlarge

Above is a two year chart of the S&P500 showing the current wave counts.

The previous blog update on September 14th labeled the move down from the May top as major wave Y of primary wave B(nearing completion) with a 1st price target for primary wave C near the July highs.

Major wave Y bottomed about 3 weeks later on October 4th with just a one day close below the August low. The subsequent primary wave C 1st wave then blasted up toward that 1st price target but did not quite reach it.

As mentioned previously in the blog and Twitter updates, Primary wave C should be either an impulse or ending diagonal in order to complete a zigzag from the March/2009 lows. As shown in the chart, major wave 1 of primary wave C ended at the October 27th high, major wave 2 ended at the November low and major wave 3 is now in progress. The waves thus far have been mostly three wave structures which indicates primary wave C is forming an ending diagonal, not an impulse.

An alternate count shown has major wave Y of primary wave B ending at the November low. That count would have the same outlook as the preferred count from the bottom of major wave Y. Another possibility is that a triangle ended at the December low, and that would also have the same outlook.

The price resistance shown and also mentioned in the tweets is at 1298 to 1310 and around the May high. Perhaps major wave 3 will top in that 1st price zone and major wave 5 in the 2nd price zone. I am looking for that wave 5 top to occur by late March at the latest and mid January at the earliest.

S&P 500 Updated Wave Counts

Three year chart of S&P 500 etf  SPY, click to enlarge

Above is a three year chart of the S&P 500 etf SPY showing updated wave counts. The move up from the July/2010 low to the May/2011 high (major wave X of primary wave B) does not count well as an impulse. Since the wave up from the March/09 low to the April/2010 high (primary wave A) is best counted as an impulse, primary wave C should be an impulse or diagonal in order to complete a zigzag from the March/09 low. Major wave X of primary wave B does not meet that requirement, so it must be part of a primary wave B.

Primary wave B may now be forming wave D of a triangle from the Summer highs to be followed by wave E which may complete by the last week of this month. The completed triangle would be major wave Y of primary wave B. Once primary wave B is complete, primary wave C would end somewhere above the May/2011 high and possibly above the 2007 high. A close below the August 9th low may invalidate this outlook.

Dow Wave Counts

Below is a nine month Dow chart showing the wave counts. Click to enlarge.

Minor Wave Four

The swing down from the November high could be the first wave of minor wave 4 from the July low. Unless it forms a larger zigzag, Tuesdays low may be the price low of minor wave 4. If that happens, support is at Dow 10900.

Minor wave 4 would then be followed by minor wave 5 to new highs and then a larger major wave 2 correction. A move down to the next support at 10700 may indicate that primary wave 2 is not complete.

Fifth Wave - 11/8/10

Wednesdays Twitter update said the NY composite index may be breaking out of a sideways wave 4 pattern from the Oct 13 high and a 1-3 wk 5th wave rally may ensue and the Dow may surpass the April high on that rally. That happened on Thursday/Friday.

The alternate possibility would indicate that the 5th wave will have already topped by today followed by a correction of some sort.

The strength of the market since the late September low indicates that the four year cycle low probably bottomed at the July or September low. The rally from that low usually lasts at least one year so there are several months to go at least.

The alternate count shown in the last few blog updates was a for a Primary wave [B] or [2] low at the July or September low. That now is the best count. An updated chart with counts will be posted later.