S&P500: Still on Track for 3300, but Bears Be Careful

The Break Below SPX3886 Happened. Now What?

Last week, see here, I shared using the Elliott Wave Principle (EWP) “A break below the early September low of SPX3886 opens the door for [an] impulse pattern with an ideal target zone of SPX3515-3400 for (red) W-iii/c, then a potential W-iv rally back to ideally SPX3675-3785 followed by the last drop to ideally SPX3230-3330 to complete W-v of W-c of W-A.” See Figure 1 below. Thus, the Bears are still fully in control until proven otherwise. What can that “otherwise” be?

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

If There’s No Waterfall Decline, Something Else Is At Hand

Although the preferred view thus remains that of an impulse lower, the Bears do not want to see the index move back above SPX3900 as that would start to suggest only three waves lower. See Figure 2 below. In that case, the index is most likely working on a large 3-3-5 corrective pattern, black W-a, -b, and-c, called a flat (Blue W-B). Ultimately, the Bulls will have to push the index back above the red W-b high made in mid-September to confirm this path, but it pays to be aware of it.

Figure 2. S&P500 daily chart with detailed EWP count and several technical indicators

Even this more complex pattern can still allow for SPX3680+/-20, where W-c = w-a (red dotted arrow) before the black dotted arrow kicks in. Thus, short-term, pressure remains to the downside regardless of an impulse lower to ~SPX3300 (Figure 1) or if we’re dealing with this larger flat. However, the market can have a few tricks up its sleeve. Today I presented one of them.

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