Elliott Wave Analysis w/Decline Targets for S&P 500

FX:SPX500   S&P 500 Index
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This is both an update to my wave count, based on the latest developments, and an attempt to provide a more concise picture of what I am forecasting. You may see my previous charts for S&P 500 for more in-depth explanation.

Background Hypothesis: S&P 500 has been in its 4th wave of Grand Supercycle degree since the year 2000. This is an ABC correction. Wave A bottomed in 2009, wave B topped in May 2015 at 2137.1 but, as a contracting triangle, it actually completed its terminal wave 'E' in December at 2082.6. The falling action since December is the initial stage of wave C down.

As this wave C is the post-triangle thrust from wave B, the thrust measurement from triangle wave B should determine the minimum or approximate depth of wave C's decline. The post-triangle thrust would ideally be measured at the point of origin of the triangle wave (in this case the low of year 2009, where wave B started) as the vertical distance between the backward-extended trendlines of the triangle at that past moment, yielding the expected minimum future thrust distance from either the extreme of wave B or from the end of wave E of B.

However, in this case, the span of the price distance measured at that point in time is so wide that it would actually imply a decline of the S&P well into negative territory. That would seem to be beyond the realm of possibility, unless deflation did somehow push corporate America over such a steep clifff of debt that our current scale of equity valuation would need to be rethought. Well, the idea of negative interest rates was unimaginable by most people until recently, too.

In any case, there are Elliott Wave guidelines which would tend to preclude such a deep decline for this wave, including that a C wave typically reaches its maximum span of travel at 1.618 the length of wave A (suggesting a potential lowest tolerable level of around 700 for this C wave decline in the S&P index), and more obviously that a 4th wave will not fully retrace the impulsive sequence it is part of (certainly staying above zero).

I have found, as well (see my analysis on EUR/USD for an illustration of this phenomenon on a chart) that post-triangle thrust waves (which are 5-wave impulsive sequences) often occur in stages whereby the height (or depth) of each notable spike of the thrust sequence corresponds to a thrust-measurement at each successive possibly valid point of origin found working backward in time through the body of the triangle toward its true origin, until the thrust wave based on the true point of origin has been fully realized. Again, this may be difficult to envision just from my explanation here, and so I recommend seeing my EUR/USD chart for ongoing examples.

In the case of the S&P 500 , I strongly suspect that we should be considering as the point of origin of wave B, at least presently, for measuring the thrust distance of the initial stage (first wave) of wave C, as the low of October 2014. A thrust measurement taken there has both readily conceivable and interesting implications for price action.

Read my forecast below
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Assuming the above wave count for the action so far in February, a first minor wave 'i' of a 3rd (iii) wave down has completed near 1828 and has been followed by an ABC corrective rally 'ii'. I suspect that this rally may be just about done, given a convergence of two significant Fibonacci levels: 1895-1897 represents the point where wave 'c' of 'ii' is 1.618 the length of wave 'a' and also where wave 'ii' will have retraced wave 'i' by 78.6%.
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Wave 'a' of 'ii' was also precisely 61.8% of wave 'i' based on this count. Waves 'a' and 'c' of 'ii' hitting precise .618 and .786 retracements of wave 'i' with wave 'c' also being right at a 1.618 extension of wave 'a' couldn't be more of a textbook scenario.
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I suspected the rally might end around 1895-1997, and 1896.4 seems to have been the end of it. At that point, the index turned downward in what appears to be an impulsive wave pattern. I am able to count what seem to be two sets of first and second waves. I presume the 2nd set is nested within the 1st set. Such nesting would be characteristic of the start of a third (or 3rd of 3rd) wave
Current Forecast:

The measurement between the triangle trendlines extended back to October 2014 is about 769. That distance subtracted from either the peak of wave B (triangle point A at 2137.2) or from triangle point E (at 2082.6)yields an estimated target range for wave C of between 1368.2 and 1313.9.

If we consider the decline from point E down to 1810.9 as having been a minor wave (i) and then the rally up to 1946.9 as having been wave (ii), then based on typical wave proportions we would expect a wave (iii) to fall down to between 1.382 and 1.618 of wave (i)'s length, which would be in the area of 1507-1571. Note how closely this coincides with the range of the peaks in years 2000 and 2007, between 1535-1576.

On a secondary note, if we consider that rally to 1946.9 and following consolidation during the first part of February as a more minor triangle in and of itself, using as its point of origin the 1810.9 low, it yields its own thrust target at about 1559. That could apply if the wave C thrust is taking the form of an ending diagonal, wherein 2nd waves are actually type 'B" waves which may be triangles.

After a subsequent wave (iv) retracement, we would then usually expect a wave (v) to finish the sequence at the level corresponding to between 2 and 2.382 on the same scale. In this case, that would be in the area of about 1300-1403.

In summary, based on what I see so far, I suspect we will see progression of a 3rd wave into the mid 1500 area, an upward correction of perhaps 38.2 to 50% of that, then followed by a 5th wave down into the 1300s, which will constitute wave 1 of C.
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