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S&P 500: Is it heading to a bear market?

Elliot Wave Analysis for S&P 500

S&P 500 is the stock market index of the United States, which detects the market capitalization of the 500 most large companies listed on the stock exchanges in America. Nine of those 500 companies weigh 28,1% of the total market cap index. Apple, Tesla, JP Morgan, Amazon, Alphabet, Berkshire Hathaway, Nvidia, Microsoft, and Meta platforms, are these 9 most weighted companies of the 500 total.

The index is a benchmark reference for many other underlying assets which may be traded as options, futures, bonds, ETFs, and other global indices also. The top has been at 4818,62 points and the support from the pandemic was at 2191,86 points.

Monthly Range: Completing wave ((5)) of III

            The overall picture is shown by the monthly trading chart (log scale), in which the main trend is up, having completed or about to complete the III Cycle wave. It is seen also as the alternative scenario, but we’ll explain them all one by one.

            For the basic scenario, the index has finished the I and the II Cycle waves, while so far, was trying to extend the III Cycle as an impulse wave. Meaning, to be unfolded as a 5-wave sequence movement. The subdivided waves are the ((1)) – ((5)) Primary degree, and from this view, maybe the ((5)) has been completed or is about to end, to build the III Cycle wave.

            In the alternative scenario, which is also an uptrend, we change the end of the ((1)) and ((2)) Primary waves with that of the III and IV Cycle waves. So, the final ((5)) Primary wave was changed by the V Cycle wave. Therefore, we can assume that in both cases, the market has to move down to make the IV Cycle or the new (II) Super Cycle waves, respectively.         

Weekly Range: Completing wave (4)

          On the weekly trading chart (log scale), we observe how the final ((5)) ended, according to the basic scenario. In essence, the market has made a 1-2, 1-2 for the (3) Intermediate wave of the ((5)) Primary wave, having done the 3 Minor of the (3) Intermediate, the stronger one in price action, as the rules of Elliot wave Principle say. Thus, we have a long way to cover for the last ((5)) in such a scenario, since firstly has to be constructed the (4) Intermediate wave and then the (5) of the ((5)) of the III Cycle wave.

            In the alternative scenario maybe, the top is already the (5) Intermediate of ((5)), and like that the III Cycle has been completed.

Daily Range: Correcting in wave (4)

Coming closer to the daily trading chart (log scale), walking to the basic scenario and with regards to the last 5 Minor wave, was also unfolded to an impulse, as of subdivision of the ((i)) – ((v)) Minute degree waves. Thereinafter, a corrective pattern has taken place, as of w -x – y double correction Minor degree waves, in which we know from the Elliot wave theory that the structure is 3-3-3. Thus, the w has subdivided into a ((a)) – ((b)) – ((c)) Minute degree waves zig-zag, in which the ((a)) was a leading diagonal, the ((b)) was a simple sharp rally pullback, and the ((c)) was also a 5-wave sequence.  

The lower high at the 4637,30 points for the end of ((b)) Minute of w Minor, acts now as resistance for any upward movement. The market is about to complete the x, which will be a ((a)) – ((b)) – ((c)) Minute waves, as of a zig-zag, and after that, it is expected to move lower within the Fibonacci extension levels to finish the y Minor of the (4) Intermediate. The Fibonacci extension levels of w, to be ended by the y are the 61,8%, 100%, 138,2%, and 161,8%, where the price will be 3558,22, 3268,77, 3002,86, and 2849,51 respectively.

Our market forecast, concerning the formation of this (4) in the basic scenario is down, but in regards to the whole uptrend, we could suggest that after the completion of the correction in any scenario – (4) Intermediate or IV Cycle, the risk/reward ratio will be on our favor with at least 2:1.

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Written by Trade Zign

TradeZign (TZ) is a market forecasting firm,TZ's 10 full-time analysts cover every major market (commodities, stocks, energy, bonds, metals, currencies).

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