Saturday, 11 October 2014

S&P 500 rally from 2009's low is complete, market now embarking on 60%+ decline toward 600

The S&P 500 rally from 2009's low is likely complete, with the market now embarking on a 60%+ decline toward 600 points. To argue that point, in this post I have illustrated my Elliott Wave counts starting from the big picture, then repeatedly zoomed in to conclude with a short term chart of the market's final rally and recent decline. Charts include all sessions trade through to last week's close.

First chart shows that since the year 2000 the S&P 500 has been forming a corrective pattern. Not shown is the several decades of rally that is being corrected, so the fourteen years of correction so far is entirely proportionate. Wave B is complete, and wave C is now in the early stages, with the market embarking on a journey to (much) lower levels, certainly below the 2009 low.

Second chart chart zooms in on wave B from the first chart, to count the entire rally from the 2009 low. The rally counts as complete.

Third chart zooms in on wave 5 of the second chart, to show that the structure of the rally from the June 2013 low is complete, an interpretation boosted by the recent trend line break. I believe the rally pattern must be counted as an ending diagonal, due to the corrective action in each of the waves 1-2-3-4-5. It is unusual for an ending diagonal to show no overlap of wave 4 with wave 1, but although rare such a thing is not unheard of.

Fourth and final chart zooms in on wave c of the third chart, to count the rally from the April low to September's peak, and to show the subsequent decline. A move below the peak of wave 1 will be the final nail in the coffin of any remaining potential for new highs. The trend line break renders that rally possibility a slim one chance.