Credit: Original analysis by EWM Interactive. The content below is a restructured and expanded version of their Elliott Wave analysis of the S&P 500, initially published on November 24th, 2023.
Title: In-Depth Elliott Wave Forecast for the S&P 500 – November 24th, 2023
As we approach the end of 2023, investors and traders alike are seeking clarity on the future direction of the S&P 500. The index, a broad benchmark of U.S. equities, has experienced a wide range of movements over the last couple of years following its rapid decline in early 2020 due to the COVID-19 pandemic and its subsequent rebound and rally. Now, as global monetary policies shift and investor sentiment adjusts, understanding the next market phase becomes crucial. Elliott Wave analysis offers a structured framework to interpret these price movements and anticipate future trends.
This analysis utilizes the Elliott Wave Principle, a technical methodology that suggests market prices move in repetitive cycles or “waves” created by collective investor psychology. Thanks to decades of market behavior research, these patterns can be dissected and applied to current market action. By applying this theory to the S&P 500’s price structure, traders gain a probabilistic edge in anticipating directional moves.
Overview of Current Market Context
Many financial markets are at key inflection points, and the S&P 500 is no different. Having rebounded from early 2022 lows, the index has shown strength entering the fourth quarter of 2023. However, uncertainty persists as inflation data, interest rate expectations, and global macroeconomic headwinds continue to pose challenges. The S&P 500’s action offers a compelling setup when viewed through the lens of the Elliott Wave Principle.
Key Takeaways from the Elliott Wave Perspective
Here are the fundamental observations from the wave structure currently evident in the daily chart of the S&P 500:
– The entire bullish recovery from the March 2020 COVID-induced low can be considered a five-wave impulse, marking the completion of a Cycle degree upward trend.
– This five-wave advance likely ended in January 2022 at 4818.62, reaching the peak of wave (V).
– From this high, the market entered a corrective phase, consistent with an A-B-C structure, which unfolded as a three-wave zigzag down to the October 2022 low.
– The retracement from 4818.62 to the October 2022 low near 3491 fits the characteristics of wave A of an ongoing corrective structure.
– The rebound from this low can be classified as wave B, retracing a significant portion of the wave A decline.
– Wave B is nearing its peak as of late November 2023, and a C wave decline may be imminent, targeting a new low or a test of prior supports.
Wave B Analysis: Weak Structure Suggests Correction Is Not Over
Taking a closer look, it’s evident that wave B, while recovering a large portion of the wave A decline, lacks the strong impulsive structure that would suggest a new bull market is underway. Instead, the patterns resemble corrective behavior. Supporting this assessment:
– The rally from October 2022 does not show five clear impulsive waves. Instead, the overlapping structures point more toward a complex correction.
– Fibonacci retracement levels suggest that the market has retraced approximately 76.4% of the wave A decline, a typical level for B waves in expanded flats.
– Sentiment indicators, including the put-call ratio and investor positioning, show excessive bullishness, a typical hallmark before the completion of corrective wave B tops.
Scenario Ahead: The Impending Wave C
In classical Elliott Wave terms, after an A-B sequence, the market should prepare for a C wave. C waves often appear as powerful moves, whether upward or downward, and reflect a final resolution to the correction.
In our current case:
– Wave C is expected to decline sharply, targeting areas below the October 2022
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