S&P 500 Update: The Dreaded “final stab lower” Came. What’s Next?

Analysis of the S&P 500

Using the Elliott Wave Principle, I've been watching how the continuing correction in the S&P 500 (SPX) should evolve over the previous month (EWP). I began with "a recovery to SPX4500+/-25 shortly from whence the continuing slide to preferably SPX4150+/-25 may commence," based on the existing price data at the time. The index should rebound to SPX4315+/-25 once that goal zone is achieved, before dropping to SPX4050+/-25." Let's look at Figure 1 to understand what occurred.

When the index bottomed around SPX4062 last week, I pondered whether green wave-5 was complete or if "the market may have one more trick up its sleeve as that final thrust down – deeper in the ideal SPX3975-4040 target zone- can't be ruled out just yet." "A rise over SPX4308 will be a great initial indicator, with confirmation above SPX4515," I concluded. The predicted rebound to SPX5500+ has most certainly started if those two levels are hit in the next days and weeks." Let's take a look at the situation now that the index has dropped to as low as SPX3958.

Figure 1 shows the SPX daily candlestick chart, which includes a thorough EWP count and other technical indicators.

Conclusion and Projection

The Bulls attempted but failed to clear SPX4308 last week. As the last plunge down – deeper in the desired SPX3975-4040 target zone-" occurred, the market did indeed have the feared "one more trick up its sleeve." At this point, the index may have a few more minor scribbles to go, maybe as low as SPX3925+/-5 for a picture-perfect c=a connection.

Nonetheless, according to the EWP, it has now completed enough waves since the late-March bounce high to be considered complete. The first caution for the Bears will be a break back over SPX4160. The second warning is located at SPX4308, while the third and final warning is located at SPX4515. The second and last push to SPX5500+ should begin once those levels are crossed.