Update of the S&P 500 Index
I am only going to be updating the S&P due to the amount of time reworking the higher Degree Elliott Wave count. There is nothing significant in the overall interpretation of the wave structure, just the depth of the current downside. Last week I saw a final decline to 1210, but the sharp decline to 1195 quickly altered that. I threw a Gann Fan in to show how current lines have been acting as support. The current blue line beside the index is likely to get taken out, with support at the red line 1170 (38.2% Fib support). The lower Bollinger bands all merged yesterday, suggestive a bottom is not going to be due for 2-3 weeks. The %K recently crossed above the %D, but sharply reversed yesterday, suggestive the purple uptrend line will get taken out. The rising lower purple trend line for the %K goes against the new trend of the lower slanting purple line of the index; this is a positive reversal sign that may not come into fruition for up to one month.
The long-term blue support line from August 2004 is about to get taken out. This is going to lend to the selling pressure early today. The index is not likely to drop below 1170. The 50 and 155 day MA's were taken out the past two days, with support at the 200 day MA presently. The full stochastics has the %K beneath the %D and has not given a buy signal for entry the past few weeks. The downtrend is likely to continue for 2-3 weeks as suggested by the prior chart. Rather than a top expected by the end of October, a bottom will be established in early November with a subsequent rally lasting 6-8 weeks.
The weekly S&P is shown below. Fibonacci price retracements of the 2000-2002 decline are shown on the right hand side. The index has been traveling in a Fib channel the past 18 months and likely is going to continue. If 1170 is taken out, then 1152 will be the next level of support. The decline on the weekly chart has had the %K part sharply from the %D, suggestive of 2-3 weeks of prior downside/bottoming before the final wave up for the current move from 2003 is in place. The purple line on the full stochastics placed a negative divergence to the S&P from early 2005 till August 2005. Pending upon whether a bottom is in place in early November or mid-November will determine the height the next wave advances to.
The short-term Elliott Wave count of the S&P is shown below. Figure 5 will require reference to understand precisely what the count from Intermediate Degree and higher is in reference to; it has been relabelled as a diametric triangle. The labeling scheme of an expanding triangle-x wave-flat has not changed. The current decline when a bottom for wave [c] is in will complete wave AorW, with a sideways to slight retracement in wave BorX, with a final leg down/sideways consolidation in wave CorY. This will complete wave (F), with wave (G) remaining. From last week, the circle indicates the prior analysis proved wrong. A decline to 1210 did not happen, rather an overshoot and a swing down. None-the-less... the current market action has laid course for the rest of the year. The next Figure shows the thought market movement for the rest of the year.
The long-term Elliott Wave count of the S&P is shown below. The break in the count from last week had ripple effects, requiring the labeling scheme to be shifted to the one below. The decline from 2000-2003 had an expanding triangle-x wave-triangle to form wave a. The current move from March 2003 has been reconfigured to a diametric triangle. The thought path of the S&P over the course of the next 2-3 months is represented with the green line. The lower trend line has support at 1170, so this item incorporated with other TA for support at 1170 implies it will be tested and hold. A basing afterwards can be expected, with a final up leg 1260-1280. Based upon the current upper trend line, a move beyond 1280 is likely the top; in fact I would not expect a move to 1300 and beyond for this leg of the structure since 1205 was taken out.
October 6th, 2005