Original Analysis by EWM Interactive
Adapted and Expanded Rewrite by Assistant
Title: Elliott Wave Outlook for the S&P 500 – Possible Reversal Ahead
The S&P 500 continued its bullish journey in the first half of 2025, reaching new highs and growing investors’ optimism. However, according to Elliott Wave principles, this prolonged uptrend may be reaching a critical juncture. Market participants should closely monitor recent price movements as signs of a looming reversal may be surfacing.
In this detailed forecast adapted from EWM Interactive’s August 18th, 2025, report, we examine the structure of the S&P 500’s rally through the lens of Elliott Wave analysis to determine if the bull market is nearing exhaustion.
Overview of the Elliott Wave Principle
Before diving into the current market insights, it is essential to briefly review the Elliott Wave theory. Developed by Ralph Nelson Elliott, this method suggests that market prices move in predictable wave patterns shaped by collective investor psychology. These patterns reflect alternating cycles of optimism and pessimism and appear in recurring configurations.
According to the Elliott Wave Principle:
– Market prices move in a sequence of five waves in the direction of the main trend, followed by a corrective three-wave countertrend structure.
– The five-wave sequences are labeled as 1, 2, 3, 4, and 5.
– The corrective waves are labeled as A, B, and C.
– The cycle repeats across different timeframes, from minutes to decades.
– Wave 3 is generally the strongest and cannot be the shortest among waves 1, 3, and 5.
– Wave 4 typically does not overlap wave 1’s territory in a motive pattern.
Now let’s analyze the S&P 500’s situation through this framework.
Daily S&P 500 Chart – Uptrend in Terminal Phase?
Since bottoming out in October 2022, the S&P 500 has extended its upward trajectory. Bulls have celebrated this recovery, citing strong corporate earnings, cooling inflation, and AI-powered growth optimism. The daily chart provided by EWM Interactive presents a convincing five-wave structure that could signal the terminal phase of this rally.
According to the August 18th, 2025 Elliott Wave count:
– The advance from the October 2022 low to the August 2025 high fits within a complete five-wave impulse, suggesting the upward cycle may have ended or is very close to concluding.
– The structure of the rally can be denoted as:
– Wave 1: Oct 2022 to Feb 2023
– Wave 2: Feb 2023 to Mar 2023 (corrective pullback)
– Wave 3: Mar 2023 to May 2024 (the strongest phase of the rally)
– Wave 4: May 2024 to July 2024 (sideways to mildly lower correction)
– Wave 5: July 2024 to Aug 2025 (terminal ascent)
– The upper boundary of the Elliott channel has been reached and respected, a common feature for fifth waves.
– Momentum indicators are diverging — prices made a new high in wave 5, but RSI and MACD failed to confirm the move, a typical characteristic of a waning trend.
These observations suggest that the bullish cycle may be nearing its end. The potential for a three-wave ABC correction following the completed five-wave impulse is growing stronger.
Alternate Bearish Scenario: Five-Wave Impulse to the Downside
EWM Interactive also outlines a more bearish alternate possibility. If the August peak marked the completion of the larger bullish cycle dating back to the March 2020 pandemic lows, then a larger downtrend may be underway.
In this potential scenario:
– The recent peak in August 2025 could be the end of a grand fifth wave, finishing a multi-year impulse cycle.
– If so, the subsequent correction would not merely be a short-term retracement,
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