Is the S&P 500 Up trend over?
S&P 500 cracked an important level today the jeopardizes the ten year up trend that began near 676 back in 2009. As a result, the probabilities are shifting that an important high is in place and a significant portion of this uptrend may be retraced.
From March 2009 to October 2018, S&P 500 increased about 335% making it a memorable bull run. That memory may soon begin to fade as S&P 500 cracked an important trend line.
For the past seven weeks we have been highlighting the significance for a large correction in S&P 500. At that time, we mentioned a break below 2550 cracks this Elliott wave trend line. From an Elliott wave perspective, the (2)-(4) Elliott wave channel trend line is a barometer for the health of the 10 year up trend. Today, S&P 500 has toyed with this line.
S&P 500 chart with Elliott wave labels
A breakdown below this line suggests the uptrend that began in 2009 is over and it becomes highly probable that a retracement to the previous fourth wave is underway. The previous fourth wave sits at the February 2016 low near 1800 and is over 35% below the October 2018 highs. A move of this magnitude would place S&P 500 in bear market territory.
On a more aggressive note, the wave sequence from the 1932 lows may be considered over as well putting a period to an 87-year wave cycle. Should that be the case, then the entire 2009 – 2018 rally may be retraced with a correction unfolding back to 700.
can the s&p 500 rally to new highs?
Yes, there are wave scenarios that consider a run to new highs but the break of the (2)-(4) Elliott wave trend channel line makes them lower probability.
The break of the (2)-(4) Elliott wave trend channel suggests the bullish impulse wave is over. We can refer to our 8 scenarios after an Elliott wave impulse pattern completesand see that when it involves a termination of a wave five, then a retracement to the previous fourth wave typicall takes place.
what other markets may be affected?
You may have heard the saying birds of a feather flock together. A large S&P 500 correction likely drags lower Dow Jones Industrial Average and Nasdaq 100 as they are all us equity indices. The corresponding (2)-(4) Elliott wave trend channel line sits near 6100 in Nasdaq 100. A breakdown in Nasdaq 100 would add further confirmation to a bearish bias.
Learn more about common Elliott wave patterns by reviewing the beginners and advanced Elliott wave guides.
---Written by Jeremy Wagner, CEWA-M
Jeremy Wagner is a Certified Elliott Wave Analyst with a Master’s designation. Jeremy provides Elliott wave analysis on key markets as well as Elliott wave education resources. Read more of Jeremy’s Elliott wave reports via his bio page.
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