3-Part Analysis of SPX500
Come along for a ride, as we examine the current context of the stock market.
Part 1
Weekly
A look at the weekly shows a rising wedge formation. This formation has been identified by many market participants on this site and elsewhere, so this is nothing new. Elliott Wave Theory knows this formation as an ending diagonal, a move that brings about the conclusion of the one higher degree pattern. These diagonal patterns tend to take time to complete, but result in a sharp and abrupt reversal.
I'm not going to speculate here about the higher degree pattern, rather save it for an academic discussion for another time. A larger degree pattern from the weekly view is going to take months to play out and at least weeks before you know whether or not the preferred count is correct. In any case, where we are headed is less important than how we get there. The moves in the coming weeks should help paint a picture of the larger formation.
For the purpose here, we are at the very least looking at a decent correction coming (at least the distance of the wedge origin, but likely more). It is good to keep in mind that this is a 6 year bull market which has had very little retracement, apart from a dip in 2011.
I have pointed some some of the major intermediate term support areas in red. Depending on how you draw the lower wedge boundary, it's possible to say we have already broken out to the downside here. Because diagonals can be difficult to time perfectly, and can provide false breakout signals, I usually like to wait for support level 2 pivots back to be broken. In this case, it points to the 2039 level (first red horizonal support). When 2039 is broken, I'll be inclined to call the wedge complete.
Part 1
Weekly
A look at the weekly shows a rising wedge formation. This formation has been identified by many market participants on this site and elsewhere, so this is nothing new. Elliott Wave Theory knows this formation as an ending diagonal, a move that brings about the conclusion of the one higher degree pattern. These diagonal patterns tend to take time to complete, but result in a sharp and abrupt reversal.
I'm not going to speculate here about the higher degree pattern, rather save it for an academic discussion for another time. A larger degree pattern from the weekly view is going to take months to play out and at least weeks before you know whether or not the preferred count is correct. In any case, where we are headed is less important than how we get there. The moves in the coming weeks should help paint a picture of the larger formation.
For the purpose here, we are at the very least looking at a decent correction coming (at least the distance of the wedge origin, but likely more). It is good to keep in mind that this is a 6 year bull market which has had very little retracement, apart from a dip in 2011.
I have pointed some some of the major intermediate term support areas in red. Depending on how you draw the lower wedge boundary, it's possible to say we have already broken out to the downside here. Because diagonals can be difficult to time perfectly, and can provide false breakout signals, I usually like to wait for support level 2 pivots back to be broken. In this case, it points to the 2039 level (first red horizonal support). When 2039 is broken, I'll be inclined to call the wedge complete.
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