S&P 500 Breaks Above Trend Line; New Market Top Ahead

By: Chris Guthrie
Published September 12, 2018
03:30 AM GMT

This article is an update to the one written on September 4. The Standard & Poor's 500 Index has been in a longer corrective wave than expected. The wave sat in a relatively even trend channel with a steady resistance and support level. The index finally broke up and out of this corrective downtrend when it moved and remained above previous resistance on September 11. All of the target levels and dates are updates to the prior article. The original number and level will be lined-through if they are no longer valid while the new item is displayed in bolded red text.

Elliott Wave Theory Technical Analysis

Once minute wave 4’s bottom was established on September 7, I began using derivative analysis to identify a potential market top resulting in the simultaneous end of minute wave 5 and minor wave 3. The end of wave 4 was not confirmed until September 11, when the index broke out of the trend channel. My technical analysis accounted for all the index’s movement during the entire intermediate wave 3 which began in late June 2018. Minute wave 5 began September 7 at 2864.12. On average, wave 5’s movement has been:

   0.70 0.74 times the movement of wave 1;
   1.52 1.57 times the movement of wave 2;
   2.00 1.96 times the movement of wave 4; while
   Wave 3 is 1.87 1.84 times greater than the movement of wave 5.

Minute wave 1 moved 66.14 points. Wave 2 moved 59.99 points, wave 3 moved 114.01 points and wave 4 moved 31.37 52.38 points. Our levels of interest are 2931.43, 2976.31, 2946.10, and 2947.87 2913.06, 2958.30, 2926.08, and 2966.78.

Elliott Wave Theory Principle: the next set of movement target prices are derived from the correlation between retracement percentages of wave 2 & 4 and the extension percentage of wave 3. On average, wave 5’s extension of wave 3 has been:

   2.59 2.57 times the percentage wave 2 retraced wave 1’s movement;
   4.22 4.09 times the percentage wave 4 retraced wave 3’s movement; while
   Wave 3’s extension of wave 1 is 1.60 times greater wave 5’s extension of wave 3.

Minute wave 2 retraced wave 1’s movement by 90.70%, wave 3 extended beyond wave 1’s movement by 181.68% and wave 4 retraced wave 3’s movement by 27.52% 45.94%. Our levels of interest are 3070.31, 2931.95, and 2934.89 3068.25, 2931.95, and 3016.71.

We also keep in mind common Fibonacci percentages as potential retracement levels when determining future movement. It is important to remember one of the many Elliott Wave Theory Principles we operate under is that wave 5 does not always have to extend beyond wave 3. This means the index does not have to surpass 2916.50. However, we strongly believe wave 5 will surpass this point, mainly due to wave 4’s retracement of wave 3 being very small. Our Fibonacci levels of interest are: 2943.41, 2960.05, and 2973.51. We now have 10 potential points for the index to find its next top.

We use the same methodologies to project the days, minutes, and hours it will take for the wave to complete itself. Our ratios are based on 5-minute periods. On average wave 5 lasts:

   0.74 0.73 times the length of wave 1;
   1.30 times the length of wave 2;
   1.87 1.82 times the length of wave 4; while
   wave 3 is 2.76 2.72 times greater than the length of wave 5.

Minute wave 1 lasted 404 5-minute periods, wave 2 lasted 315 periods, wave 3 lasted 870 periods and wave 4 lasted 196 395 periods. We have estimated the top to occur between 11:15 AM EST on September 10, 2018 and 2:00 PM on September 11, 2018 09:30 AM EST on September 13 and 1:35 PM on Septmber 17..

We have taken the initial 10 levels of interest and removed the four highest levels as outliers. The key levels of interest reside between 2931.43 and 2947.87 2928 and 2940-2946. The chart below outlines three different colored polygons where the next top could occur. The green polygon on the bottom of the three is the most likely and conservative target. The yellow zone in the middle is also likely but may not occur. The red level on top is unlikely but could occur. The polygons are shaped based on trend lines of resistance that have impacted the index on multiple occasions during a majority of 2018. These trend lines are the reason the top range in the green zone fluctuates. Time will also play a determining factor in the top.

NEW CHART, CURRENT AS OF SEPTEMBER 10, 2018 Elliott Wave Forecast For Next Stock Market Top

All forecasted movement discussed in this article can be tracked in the UPDATED interactive chart below. Simply click the play button on the right side of the screen and track the index over the next week. My articles will follow as we monitor the prelude for the next stock market crash.

Counter Analysis

My analysis could be wrong again, however, it is unlikely we are still in minute wave 4. The index finally displayed positive upward movement after slowly moving down for more than a week. A drop below 2864.12 would signify additional downward movement is possible. Another update would be published in this instance. Otherwise the next planned article will come out when the index first enters the levels of the green box.

Disclaimer: I currently have long positions on SPY. I do not intend to enter additional positions at the time of writing. This article is for reference only and should not be solely relied on to predict future movement. Historical movements and technical indicators should never be the sole basis for entering positions involving risk. You should not take a risk without fully understanding the system, market, and having established trading discipline. Make sure appropriate research is conducted prior to taking any risk in a marketplace. The author and Limitless Life Skills LLC do not have an interest, outside of the holdings disclosed, or relationship with the companies mentioned in this article.

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