Quick Take: S&P 500 Confirms Wave 5 Lower, Should Bottom Soon

stock market, stock chart, technical analysis, investing

By Andrew Nyquist
A few weeks ago, I posted a chart of the S&P 500, indicating a strong possibility of a move below 1100 and labeling this as a S&P 500 Elliot Wave 5 move.  Now, I’m not a traditional elliot wave theorist by any means, so take that with a grain of salt, but I do keep an eye out for the formation of impulse and corrective waves.  Wave counts are just another tool in an investor’s technical arsenal.  And we’ll take all the assistance we can get when assessing risk in a treacherous tape.

Late yesterday, the current S&P 500 elliot wave broke the wave 3 low confirming that this move lower is wave 5.  So, how much lower will the markets go?  Well, a look at the fibonacci retracement levels outlines a broad range of 1020 to 1100, but due to the “heavy” feeling in the air, I would guess a bottom is coming sooner than later (i.e. this week).  And further, understanding that the wave count is in its final stage, and the futures are indicating an open into the afforementioned range, I am going to be buying select stocks that I like today (and throughout the week should opportunities arise).

After the market bottoms, look for a relief rally up to 1180-1200 area.  This rally will probably play out over a 1-3 month period and a stair step reduction in volatility should create an environment of fits and starts (i.e. choppiness).

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Annotated chart attached for reference.  Note the investment proxy for the S&P 500 is the etf SPDR S&P 500 (SPY)

S&P 500, technical chart, market support levels



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No positions in any of the securities mentioned at time of publication.

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of his employer or any other person or entity.