S&P 500 Elliott Wave: Searching For Equilibrium

Worldwide stock markets continue to take it on the chin as the uncertainty of the tariffs play out. From an Elliott wave perspective, the patterns still appear incomplete to the downside.

Current Elliott Wave Analysis

If you recall from our March 31 report “Targeting August 2024 Low”, we forecasted a temporary bounce in the SP500 to hold below 5,800, then a decline to 5,100 and possibly lower levels. So far, that has played out as forecasted.

The current Elliott wave for SP500 still appears incomplete to the downside. I suspect today’s upward volatility is a small degree wave four and that another decline to retest today’s lows may appear in the next couple of days.

There are two patterns that may have completed at the 2025 high.

The more obvious pattern is a completion of the impulse rally from the October 2022 low to the January 2025 high. If we apply a Fibonacci retracement level to the rally, then the 61.8% retracement level appears at the 4,300 handle. Therefore, a decline to around 4,300 would be considered a ‘normal’ correction of the 2022 rally.

Today, the decline has paused near the January 2022 high at 4,662. Additionally, the 38% retracement level of the October 2022 rally is near 4,950. It is possible that SP500 could stage a rally to new highs, though I am considering this lower probability at the moment. The decline has been relatively brief in both price and time to effectively correct the 2+ year rally.

As a result, a larger decline in price and a longer correction in time is needed to effectively correct the 2022 rally.

There is a longer pattern going back to 2009 that can be counted as complete too. If indeed that 2009-2025 impulse pattern is completed, then deeper cuts are possible down to 2,600-3,500 (see yellow box on the image above).

This price zone is guarded by the wave (4) low and the 38.2% Fibonacci retracement level. Of course, if the rally from 2009 is complete, then even lower levels below 2,600 are possible. However, for now, one step at a time.

Bottom Line

SP500 appears to be in wave ((iii)) or wave ((c)) of a decline. This decline appears incomplete and could reach 4,300 in the coming days.

There is a larger pattern that can be counted as complete, too. If the rally from 2009 is over, then a deeper cut to 2,600 – 3,500 is considered ‘normal’.

If SP500 rallies above 5,488 to overlap the March 31 low, then we’ll consider a medium-term low is in place.

Short-Term Bias: Bearish

Long-Term Bias: Bearish

Key Level for Bearish Bias: 5,488 (March 31 low)

Initial Target: 4,300

Secondary Target: 2,600 – 3,500