**Elliott Wave Analysis of S&P 500 – July 28th, 2025**
*Original analysis by EWM Interactive*
The S&P 500’s remarkable rally that began in early 2023 has continued into the middle of 2025, leaving many investors wondering how far it can go and whether the uptrend is sustainable. Utilizing Elliott Wave Theory, EWM Interactive presents a comprehensive analysis of the current state of the U.S. stock market, particularly focusing on the structural formation in the S&P 500 index.
This article provides an in-depth look into the latest wave developments, long-term context, and possible future scenarios, based on Elliott Wave labeling principles.
Overview of Elliott Wave Theory Applied to the S&P 500
Before diving into the specifics, it’s important to understand how Elliott Wave Theory is used in analyzing the market structure:
– Elliott Wave Theory posits that financial markets move in repetitive cycles or “waves” influenced by crowd psychology.
– A full Elliott Wave cycle typically consists of five impulse waves in the direction of the larger trend, followed by three corrective waves against it.
– Impulse waves are labeled as waves 1, 2, 3, 4, and 5, while corrective phases are labeled A, B, and C.
– Patterns repeat on multiple degrees, meaning long-term structures can be broken down into smaller subdivisions of waves.
Long-Term Outlook: The S&P 500’s Multi-Year Bull Market
– The current wave structure traces back to the March 2020 COVID-19 market crash, which marked the end of a correction and the beginning of a new bullish cycle.
– From the March 2020 low, the S&P 500 has been progressively building an impulse sequence.
– EWM Interactive’s labeling suggests that the entire movement from the 2020 low to the late-2021 high represents wave (1) of a larger degree impulse.
– The subsequent correction that lasted through much of 2022 and early 2023 formed wave (2).
– With wave (2) behind us, the index embarked on wave (3) in 2023, a powerful bullish phase usually characterized by strong and extended price movement.
Placement of the Current Rally Within Wave (3)
– According to the original analysis, the market is currently in the later stages of wave (3).
– Wave (3) typically comprises five sub-waves, with wave 3 of (3) often being the most aggressive and sharp.
– EWM’s count shows that sub-waves 1, 2, 3, and 4 of (3) have completed, leaving the final wave 5 of (3) in progress or nearing completion.
Signs Suggesting That Wave (3) is Ending
– The magnitude and duration of the rally from the 2023 low suggest exhaustion in buying momentum, which aligns with the finishing stages of wave (3).
– Elliott wave guidelines identify wave 5 as typically being weaker than wave 3 and often prone to bearish divergences in momentum indicators, such as the RSI or MACD, which seem to be occurring now.
– Volume patterns are also beginning to show decline on recent upswings, another classical indicator of waning upside pressure.
Once wave (3) completes, a corrective wave (4) is expected.
Expectations for Wave (4)
When wave (3) of the larger degree terminates, a corrective wave (4) will likely follow. Based on typical Elliott Wave behavior:
– Wave (4) usually retraces between 23.6% and 38.2% of wave (3)’s advance.
– The correction could take the form of:
– A flat pattern, where all legs are roughly equal in length.
– A zigzag, where the A and C legs are impulsive, and wave B is corrective.
– A triangle structure (though rare in wave 4 of wave 3).
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