Dr_Roboto

S&P 500 Supercycle waves - The sky is falling! Down to 1600?

AMEX:SPY   SPDR S&P 500 ETF TRUST
So, don't take this too seriously (hence the sky joke). I have been noodling over my wave analysis for the S&P 500 . Something just did not feel right about how things are playing out and what I had laid out. I know that waves are more art than science and everyone seems to have there own counts. It just seems irrational to think about how bad things really are out there due to COVID-19 and that the S&P is headed to 4000, 5000, or 6000 like all the bulls keep saying. It is also clear that the NSADAQ bubble over inflated the S&P , and even then it was only the core FANG (...) stocks that really pulled most of the weight. All signs of a bubble. All signs that the S&P is in a massive corrective wave B. Why the entire motive supercycle wave works out to almost 25 years exactly is interesting.

Again, don't take this as trading advice. Just enjoy it for it what is worth, free.

I do find the pattern in the RSI interesting. If you try hard enough you can probably fit trend lines to any scenario you can come up with. Just interesting that they naturally came out this way.

I like to refer back to this Elliott Wave guide when trying to adjust things.
https://elliottwave-forecast.com/elliott...

One of the core things is the description about wave personalities. After rereading, I feel my new wave setup seems to match these personalities much better. Obviously every bull and bear market has its own unique personality and not all of the things below apply, but the core should stay the same. The COVID-19 shutdown clearly accelerated many things that you many not see in a normal corrective wave, so take that into account. You can read and make up your own mind.

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Wave 3: In Elliott Wave Theory, wave three is usually the largest and most powerful wave in a trend (although some research suggests that in commodity markets, wave five is the largest). The news is now positive and fundamental analysts start to raise earnings estimates. Prices rise quickly, corrections are short-lived and shallow. Anyone looking to “get in on a pullback” will likely miss the boat. As wave three starts, the news is probably still bearish , and most market players remain negative; but by wave three’s midpoint, “the crowd” will often join the new bullish trend . Wave three often extends wave one by a ratio of 1.618:1. Wave 3 rally picks up steam and takes the top of Wave 1. As soon as the Wave 1 high is exceeded, the stops are taken out. Depending on the number of stops, gaps are left open. Gaps are a good indication of a Wave 3 in progress. After taking the stops out, the Wave 3 rally has caught the attention of traders.

Wave 4: At the end of wave 4, more buying sets in and prices start to rally again. Wave four is typically clearly corrective. Prices may meander sideways for an extended period, and wave four typically retraces less than 38.2% of wave three. Volume is well below than that of wave three. This is a good place to buy a pull back if you understand the potential ahead for wave 5. Still, fourth waves are often frustrating because of their lack of progress in the larger trend.

Wave 5: In Elliott Wave Theory, wave five is the final leg in the direction of the dominant trend. The news is almost universally positive and everyone is bullish . Unfortunately, this is when many average investors finally buy in, right before the top. Volume is often lower in wave five than in wave three, and many momentum indicators start to show divergences (prices reach a new high but the indicators do not reach a new peak). At the end of a major bull market, bears may very well be ridiculed (recall how forecasts for a top in the stock market during 2000 were received). The wave 5 lacks huge enthusiasm and strength found in the wave 3 rally. Wave 5 advance is caused by a small group of traders. Although the prices make a new high above the top of wave 3, the rate of power or strength inside wave 5 advance is very small when compared to wave 3 advance

Wave B: Prices reverse higher, which many see as a resumption of the now long-gone bull market. Those familiar with classical technical analysis may see the peak as the right shoulder of a head and shoulders reversal pattern. The volume during wave B should be lower than in wave A. By this point, fundamentals are probably no longer improving, but they most likely have not yet turned negative

Wave C: Prices move impulsively lower in five waves. Volume picks up, and by the third leg of wave C, almost everyone realizes that a bear market is firmly entrenched. Wave C is typically at least as large as wave A and often extends to 1.618 times wave A or beyond.
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It looks like to me that we are experiencing a regular or expanded flat.
https://elliottwave-forecast.com/elliott...
https://elliottwave-forecast.com/elliott...

Comments

Nice wave analysis, it’s one of a few more likely scenarios...
+1 Reply
Gd work
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Good idea mate.
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Nice work
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Beautiful explanation
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Try starting from 1932, had the top at 3540
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Dr_Roboto b4f9749e990c43fd850e22bb173c1e
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Dr_Roboto Dr_Roboto
Note that we just barely missed that 3656 level by hitting 3585 at the recent ATH. That is pretty dang close if you ask me.
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