Title: S&P 500 Elliott Wave Analysis – December 29th, 2023
Author: Ivo Luhse | Source: Elliott Wave Analysis by EWM Interactive
The U.S. stock market has experienced a significant rally in 2023, with the S&P 500 gaining over 24% by the end of December. Driving this rally were constructive expectations about Federal Reserve policy, resilient corporate earnings, and a general belief that the U.S. economy could achieve a “soft landing.” However, applying Elliott Wave Theory reveals a more detailed picture that helps traders and investors prepare for what might lie ahead.
In this analysis by Ivo Luhse for EWM Interactive, the long-term and short-term wave structures of the S&P 500 are outlined to assess whether this bull market has further room to run or is nearing exhaustion.
Overview of Elliott Wave Structure
At the heart of Elliott Wave Theory lies the idea of repetitive cycles in market behavior, mirroring investor psychology in five-wave impulse patterns and three-wave corrections. These patterns enable analysts to forecast potential price movements based on historical data and patterns.
The current structure under review involves dissecting the post-COVID bull wave that started in March 2020 and where the index stands in the broader cycle beginning from the lows of the Great Financial Crisis in 2009.
Long-Term Outlook
– The bottom in March 2009 marked the end of a major corrective wave and the beginning of a new five-wave cycle higher.
– From 2009 onward, the S&P 500 unfolded a large-degree impulsive structure labeled:
– Wave I: 2009–2015
– Wave II: 2015–2016 correction
– Wave III: 2016–2020, ending at the early 2020 highs
– Wave IV: The COVID-19 crash — a sharp but brief decline in March 2020
– Wave V: Started in March 2020, completing in January 2022 at the all-time high near 4818
This marked the completion of a Grand Supercycle wave or at least a Primary-degree five-wave sequence from 2009. Hence, the subsequent bear market into October 2022 was treated as an A-B-C correction, forming a large (A)-(B)-(C) sequence.
Medium-Term Wave Count
– Wave (A): The initial selloff from the 2022 peak to the June 2022 lows
– Wave (B): A recovery into August 2022
– Wave (C): A final selloff completing the correction in October 2022 near 3500
This correction likely marked the completion of a cycle or primary-wave correction, allowing for a new five-wave advance to unfold from the October 2022 low. This is where the current impulsive structure is unfolding, and it is the focus of Ivo Luhse’s December 29th update.
Current Position: Intermediate Term Impulse Wave
From the October 2022 low below 3500, a new five-wave structure is being outlined, suggesting the market is preparing for a fresh new cycle or at least a strong retracement of the preceding decline.
Key developments:
– Wave 1: October to December 2022 — a strong rally from ~3500 to ~4100
– Wave 2: Minor pullback from December 2022 to March 2023
– Wave 3: Most aggressive move upward — March to August 2023 — pushing the index near 4600
– Wave 4: Corrective decline into October 2023, possibly ending near 4100
– Wave 5: Ongoing, began in October 2023 and stretching into December 2023, taking the S&P 500 above 4760
Projection suggests that this fifth wave may test or exceed the January 2022 highs around 4818. This could be the final move before
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