Is the S&P500 Still on Track for $3300?

The Impulse Path to the Downside is Still Unfolding

Since mid-September, see here, I am tracking a possible impulse move down for the S&P500 (SPX) from the mid-August high (i.e., five waves lower as per the Elliott Wave Principle (EWP) )

Back then, “the focus until proven otherwise” was for an ideal (red) W-iii/c low at SPX3400-3515, a W-iv back up to SPX3675-3785, and then a W-V back down to ideally SPX3230-3330 to black W-c?. See figure 1 below. The index bottomed on September 30 at SPX3584, rallied to SPX3723 last week, and it is now trading around SPX3580s. So where does that leave us? Allow me to explain below.

Figure 1. S&P500 daily candlestick chart with detailed EWP count and technical indicators

Figure 2 below shows the ideal Fibonacci-based path for an impulse (five-wave move) to the downside, which is the structure/path one applies initially to make one’s forecast: anticipate. The market will then decide how accurately it wants to fill that in for as long as “the third wave is not the shortest wave, and the fourth wave does not overlap with the first wave.”: monitor and adjust. W-3 of -iii ideally targets the 1.000 to 1.236x extension, W-4 of -iii the 0.764-0.618x Fibonacci-extension, etc. I have also drawn these target boxes in Figure 1, with the W-5 of W-iii ideal target zone in blue.

Figure 2. Ideal Fibonacci-based impulse pattern to the downside

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If we apply this structure to the current price action, see Figure 1, it follows that W-3 of -iii fell a little bit short but that W-b of -4 (of -iii) then reached the 100% extension. Moreover, the overnight Futures market went as low as 3560 on October 2^nd. W-4 topped where it had to (the red 76.40% extension), and the logical conclusion is that W-5 of -iii is now underway with an ideal target zone of $3410-3513 (the red 138.20-161.80%) while knowing that the markets do not always have to follow this perfect path. Besides, the blue W-5 od -iii target zone sits at SPX3345-3412, thus there’s a nice Fibonacci confluence, which often works as a magnet for price.

The Next Target is Ideally SPX3410-3515

Thus, over the next few days, if the index wants to continue to follow the ideal impulse path, it should move lower to SPX3410-3515, bounce back to the ideal red W-iv target zone ($3680-3785), and then drop one last time to the perfect red W-v target zone (SPX3242-3345).

By then, the SPX should be ready for a multi-month counter-trend rally. However, if the index does not comply, and rallies back above the red W-i/a low (SPX3887), with a serious warning for the Bears above last week’s high ($3723), then this impulse path is invalidated. The multi-month counter-trend rally has then already started per the “alt: a, b, c” option.

Thus, the S&P500 is still following an ideal Fibonacci-based impulse to the downside rather well and is, therefore, still on target for the 3300s. Only a break back above the September 6 low ($3887) will throw a wrench in the Bear’s work and tell us a multi-month Bear market rally challenging the August highs is already underway. Whatever way we slice and dice it, a large counter-trend rally is brewing. Now it is simply a matter of “pay me now” or pay me later”, with the latter option preferred.