This article is a rewritten and expanded version of the original analysis provided by EWM Interactive on July 21, 2025. All credit goes to the original author, Ivo Luharski. The content synthesizes and elaborates on the Elliott Wave analysis of the S&P 500 index based on the original post, with additional context and explanation aimed at providing a more comprehensive understanding of the outlook.
Elliott Wave Analysis of the S&P 500 – July 21, 2025
The S&P 500 index has reached new all-time highs, pushing above the 5600 mark. This upward momentum has compelled traders and analysts to reassess the strength of the ongoing bull market. In this detailed analysis, we will review the structural developments in the S&P 500 using the Elliott Wave Principle. The price action over recent years is crucial in determining whether the rally can continue or is approaching a significant turning point.
Overview of Recent Market Movements
Since the March 2020 COVID-19 market bottom, the S&P 500 has been in a sustained bullish trend. The climb from the pandemic lows has occurred in five discernible waves, signaling a clear motive wave development under Elliott Wave theory. Based on labeling provided in the original article and expanded here, the following structure is identifiable:
– Wave 1: The rise from the March 2020 low to September 2020 set the initial stage for the bull market.
– Wave 2: A corrective pullback occurred from September to October 2020, resembling a flat correction.
– Wave 3: Extended sharply and ran from October 2020 through early 2022, capturing the post-pandemic economic optimism and central bank stimulus.
– Wave 4: A more time-consuming correction that unfolded between January and October 2022.
– Wave 5: The most recent uptrend, from October 2022 to the present July 2025 highs.
Each of these legs confirms typical Elliott Wave structures, and understanding where we are within this broader picture is the key to market positioning. Let us dive deeper into this final fifth wave to gain insight into the nature of the current rally.
Detailed Look at Wave 5
According to the original analysis, wave 5 has developed its own substructure consisting of five smaller degree waves. This fractal nature is consistent with Elliott’s observation that markets move in similar patterns regardless of the scale. The internal labeling within wave 5 is critical to track as it gives clues about nearing exhaustion points or potential accelerations.
Here is the substructure of wave 5 as interpreted:
– Wave (i): Began in October 2022 and ended in April 2023. It marked the first push higher in wave 5’s sequence.
– Wave (ii): A correction that took place from May to June 2023, forming a typical zigzag pattern.
– Wave (iii): A strong bullish leg that carried the index higher through the end of 2023 and into early 2024.
– Wave (iv): A shallow but prolonged sideways correction during most of Q2 2024.
– Wave (v): The final rally leg that began in mid-2024 and is currently extending into new highs beyond the 5600 level.
Wave (v) is where the market currently sits. It is essential to note that fifth waves can be tricky. They often end in climactic bursts of bullish activity, driven more by emotion than fundamentals. Traders who jump in late during this stage are taking on considerable risk.
Selloff Risk Growing at the End of Wave 5
Once wave (v) completes, the entire five-wave cycle from March 2020 will be over. According to Elliott Wave principles, markets move in a five-wave impulse in the direction of the larger trend, followed by a three-wave corrective decline. This implies that once the current rally ends, a significant correction is due.
Key indicators and observations suggesting caution include:
– Momentum
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