The Elliott Wave Update on the S&P 500 – July 16, 2025
Originally authored by EWM Interactive
Link to Original Source: [EWM Interactive – Elliott Wave Update – S&P 500 – July 16, 2025](https://ewminteractive.com/elliott-wave-update-sp500-july-16th-2025)
As of mid-July 2025, the S&P 500’s price action continues to unfold in alignment with EWM Interactive’s Elliott Wave roadmap. After a prolonged rally that defined most of the recovery period from the COVID-19 market crash, new patterns are starting to emerge across equity indices. The current setup suggests that a significant market reversal might be on the horizon. This Elliott Wave analysis focuses on interpreting the recent moves of the S&P 500 index to understand the broader trend and what might lie ahead.
Understanding Elliott Wave Theory: A Brief Overview
Before diving into the current S&P 500 update, it’s crucial to revisit the foundational principles of Elliott Wave Theory, which is the core methodology used in this analysis.
Key Concepts:
– Elliott Wave Theory is based on the idea that markets move in repetitive cycles.
– These cycles are composed of five-wave impulsive moves in the direction of the trend, followed by three-wave corrective moves in the opposite direction.
– Impulse waves are labeled as 1, 2, 3, 4, and 5, and corrective waves are labeled A, B, and C.
– The theory assumes crowd psychology is the main driver of market trends, with recurring patterns of optimism and pessimism shaping wave structures.
S&P 500 Elliott Wave Count as of July 2025
The long-term chart of the S&P 500 reveals how the index has progressed through various Elliott Wave stages over the years. The latest update from EWM Interactive suggests the index may now be in the midst of a deep correction after completing a multi-year five-wave impulse sequence.
Highlights of the Update:
– The rally that began after the COVID-lows formed a clear five-wave impulse on the monthly and weekly charts.
– Wave (5) of this impulse is now confirmed complete, potentially finalizing a cycle-degree uptrend that dates back more than a decade.
– The market is expected to transition into a larger corrective phase, possibly an A-B-C pattern.
Detailed Multi-Year Impulse Breakdown:
– Wave (1): Initiated post-COVID recovery in mid-2020. Strong momentum alleviated fears of lasting economic downturns.
– Wave (2): A consolidation phase during early 2021, seen as a shallow retracement (typical zigzag structure).
– Wave (3): The longest and most powerful stage, carrying the index beyond historical highs well into 2023. Strong growth in tech and AI sectors fueled this expansion.
– Wave (4): A sideways corrective pattern formed in late 2023. Many investors mistook this range as a sign of market stagnation, but within the Elliott Wave framework, it aligned with a flat correction.
– Wave (5): The final wave extended from early 2024 into the first half of 2025. It showed signs of exhaustion with decreasing volume and bearish technical divergences, especially in RSI and MACD.
Bearish Evidence: Signs of Trend Reversal
A number of warning signs emerged as the S&P 500 completed its Wave (5), drawing attention to the possibility of a significant downturn.
Major Bearish Indicators:
– Divergence between price and momentum indicators (RSI failed to mirror new highs).
– Technical exhaustion at Wave (5) high.
– Overcommitment in leveraged positions among retail and institutional investors.
– Breakdown below key support trend-lines, suggesting loss of upward momentum.
Implication of a Completed Five-Wave Cycle
According to Elliott Wave principles, once a five-wave impulse completes, a correction in the form of an A-B-C pattern typically follows. Given that this five
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