Here's the latest Elliott Wave count for the S&P 500

Elliot Wave analysis is one of the ways that technicians can monitor the market. It has many critics and is often viewed as subjective. However, I do often like to look at the market in this context because it can give a better view of where the market has been and where it could possibly go.

In its’ very simplest form, Elliott Wave theory is just the concept that the stock market moves in five waves with the prevailing trend and three waves against the prevailing trend. The waves that move with the prevailing trend are labeled 1,2,3,4,5 (or a variation thereof). Of those numbered waves, 2 and 4 correct 1 and 3. The waves that move against the prevailing trend are labeled A,B,C (or a variation thereof), where B corrects A.

Where is the S&P 500 now based on conventional Elliott Wave Analysis? Below is a yearly chart with labels:




This chart is from www.elliottwavemarkettiming.com and have that websites labels on them. The “Daily Linear Scale Charts” as shown above are free. Subscribers have access to intraday charts. As a dabbler in Elliott, I happen to agree with how the chart has been labeled.

Let’s focus our attention to the year 2003 where the green “a” is located. The implication of the “a” is that in 2003, wave a in Cycle degree ended. This wave is part of larger Supercycle Wave 4. I am assuming that this particular site is using purple numbers to denote Supercycle Degree. It is not as terribly important to categorize the exact degree of cycle that we are in as it is to understand in which wave structure we are operating with. My logic is leading me to assume that the purple numbers denote Supercycle Degree. Elliot wave technicians typically will use parentheses and roman numerals at this degree. It would be (III) for example instead of purple 3.

Thinking about it in a different way in order to jog the old memory, Supercycle Wave 3 was at the height of the most recent raging bull market. It is often the case that wave 3s are the strongest and longest lasting so this makes perfect sense. This does imply however that we have one more large rally left (Supercycle Wave 5) that will likely take us past the highs of 2000. It is not easy to trade based on Supercycles for my time horizon, (Supercycle 3 lasted about 20 years), I need to think in Primary and Intermediate Degree; however, this is giving me a nice context in which to go further.

As I noted earlier, Cycle degree wave a ended in 2003. We are now in Cycle degree Wave b. Wave a was a fairly simple zig-zag correction. Wave b is anything but simple (typical of B waves). We need to know that wave b will end and that wave c is a down wave that could take up quite a bit of time. It looks as if wave b is a type of correction called a “triple three” in Cycle degree. A “triple three” is basically 3 threes’ joined together with two other threes called Xs. The labeling is W-X-Y-X-Z. You can infer from the chart above that the market has gone through waves W-X-Y-X, and we are currently in wave Z (no label shown so not yet complete).

The current wave is likely the last wave of the b correction. At this very moment, the market is likely in wave Y (of wave Z) of a Double Three {two threes connected by one three (W-X-Y)}. However, the double three could of course turn into a triple three. Currently, I am trading within the provisions that the market is in a Supercycle 4 correction and that the Cycle b wave is closer to being finished than it was at the beginning of the year. In the large context of things, this implies that we will have a Cycle c wave (down) and then start a Supercycle 5 Wave (up). If you are interested in learning more about Elliott, I encourage you to read Elliott Wave Principle by A.J. Frost and Robert Prechter.

Sara Conway is a registered representative at a well-known national firm. Her duties involve managing money for affluent individuals on a discretionary basis. Currently, she manages about $150 million using various tools of technical analysis. Mrs. Conway is pursuing her Chartered Market Technician (CMT) designation and is in the final leg of that pursuit. She uses the Point and Figure Method as the basis for most of her investment and trading decisions, and invests based on mostly intermediate and long-term trends. Mrs. Conway graduated magna cum laude from East Carolina University with a BSBA in finance.

candsconway@yahoo.com