🍎 🍕 Less apples, more pizza 🤔 Have you seen Buffett’s portfolio recently?Explore for Free

Is S&P 500 Taking a Detour?

Published 2023-03-13, 02:45 p/m
US500
-

Over the last several weeks, we have been tracking two Elliott Wave Principle (EWP), counts for the S&P 500 (SPX) as the price action has been less-than-ideal, i.e., overlapping and stated,

"Our primary expectation is for a three-wave move to ideally 4272-4374, but we must now be cognizant that the index could stall out at around 4100+/-50 before heading down to 3700-3800.

The first order for the bulls is a move above the … 4028 high, followed by a break back over the February 17 high at 4081."

The SPX rallied early last week to as high as 4078, but not above the critical 4081 level, and continued throughout the week lower. It closed on Thursday, March 9 at 3918, which was our cue that the market chose the alternate "detour" route. See Figure 1 below.

Figure 1.S&P 500 Daily Chart

Indeed, we gave the EED option plenty of room to materialize. It all looked good up to last Wednesday, but we finally got our answer the next day. Moreover, although we expected a more complex, subdividing red W-b, we only got a three-day rally.

In hindsight, this matches better with the average seasonality for the S&P 500 during US Presidential Pre-election Years. See Figure 2 below. It has a high in early March and a low around mid-March. Note these pattern comparisons are not about the magnitudes but about when the lows and highs are expected, which are all +/- 2 to 3 days.

Figure 2
S&P 500 Annual Seasonality

Back to the price chart in Figure 1, we find that although it would look better on a daily time frame with a more pronounced green W-3, 4, 5, the hourly resolution (not shown here) does suggest red W-c/y can be considered complete.

Besides, the index reached the upper end of the red target zone where red W-c = W-a. Thus, a move back above the green W-1 low at 3980 will tell us the current decline is over. The index will then have to break above the February high to confirm black W-c is underway, which could rally to as high as 4500+ for a standard c=a relationship. Sounds outlandish?

Focusing on the seasonality chart in Figure 2 suggests a rally into May, possibly even July. And although the markets do not have to follow average seasonality at all, the current decent YTD correlation suggests it will. We know from the EWP that a rally above 3980 which stalls at ~4075+/-25 and then drops below today's low means the index is well on its way to the mid-2000s.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.