In our previous update, we predicted the use of the Elliott Wave Principle (EWP) for (SPX).
“…the (grey) $5,093 level is support and was tested today, and anything below it would be a strong warning for the bulls. To be confirmed, we would need to see a break below $5056 and a followthrough below $4946. However, like last time, the bears fail to break below the critical level and move towards the next target zone at ~$5260. If this is not achieved and the index rises further, the support will be raised to $5,150.
Fast forward, the index held the $5,093 level, but broke above it, above the March 8th high of $5,189, and as expected reached $5,264 on March 28th. . However, the past three weeks have seen a combined rise, strongly suggesting that a closing price diagonal is forming. See Figure 1 below.
Figure 1. Daily SPX chart with detailed EWP numbers and technical indicators
For a 5-wave termination diagonal, the wave structure is such that all 5 waves of the termination diagonal are resolved into only 3 waves each, resulting in a 3-3-3-3-3 count where the wave structure overlaps and becomes confusing. Mostly. The frequency tends to be large. Most ending diagonals are wedge-shaped, falling within two converging lines. Waves 3, 4, and 5 will reach Fibonacci extensions of 100-123.60%, 50.0-61.8%, and 138.20-161.80% of W-1, respectively, measured from the low of W-2. is common. In Figure 1 above, you can see that the previous gray Wi, ii, iii, and iv are all made up of three waves, and W-iii and W-iv are up and down with exact Fib extensions . The gray arrow shows that if the length of Wi,iii and potential Wv are equal, the latter can accurately target an expansion of 161.80% at $5390.
Therefore, the price action ticks all the ED boxes. However, as always, the forecast is conditional on above colored warning levels, with the bulls' first warning (blue) being below yesterday's high, and the second being below Tuesday's low, at $5055. Triggered when below the red warning level. It fell to $4600+/-100.
In the last update, we learned that although negative divergences between some technical indicators are obvious, they are conditions and not triggers because “a divergence is just a divergence until it disappears.” .
The Bears have not yet fallen below collar price, as price is the final arbiter. [warning] …, used to alert premium members that the chances of a top position are increasing with each subsequent break. ” After three weeks, the differences became even more apparent. Yet, the price of the index has not yet reacted to it, indicating that price is indeed the final arbiter since the divergence is a condition rather than a trigger.
Assume that the evaluation of the ending diagonal price pattern is correct. These price patterns are notoriously tricky due to overlapping price action. In that case, a breakout above last week's high could ideally aim for $5,390. Ultimately, we would need to see a break below $5,056, with a severe warning below $5,100, to confirm that a significant ceiling has been broken.
