Elliott Wave Analysis of the S&P 500: Forecast and Insights for January 5th, 2026
Adapted and expanded from an article by EWM Interactive
The Elliott Wave theory, developed by Ralph Nelson Elliott in the 1930s, remains a powerful tool for analyzing market cycles and investor psychology. By identifying repetitive wave patterns within price movements, traders and analysts can better forecast market trends and reversals. On January 5th, 2026, EWM Interactive published an in-depth look at the S&P 500 index through an Elliott Wave lens, highlighting both the current standing of the market and expectations for the near future.
This article builds on their insights, expanding on the details of the wave structure, interpreting the analysis in practical terms, and offering a comprehensive 1000-word review of the current Elliott Wave scenario for the S&P 500. Full credit is due to EWM Interactive for their original analysis.
A Brief Overview of Elliott Wave Principles
Before diving into the current wave count, it’s important to review the core principles of Elliott Wave theory:
– Market price moves in a series of five impulsive waves in the direction of the primary trend (motive waves)
– These are followed by three corrective waves moving against that trend (corrective waves)
– Impulsive waves are labeled as 1, 2, 3, 4, and 5
– Corrective waves are labeled as A, B, and C
– Wave 3 is typically the strongest and longest of the motive waves
– Wave 4 tends to provide a noticeable pullback before the final push of Wave 5
– Corrective waves (ABC) can come in various forms including zigzags, flats, and triangles
Understanding and identifying this structure is key for forecasting future price action based on past behavior.
The S&P 500’s Larger Wave Structure
As of January 5th, 2026, EWM Interactive’s wave count suggests that the S&P 500 is currently in the late stages of a fifth wave within a larger degree structure. More specifically:
– The post-Global Financial Crisis bull market, which began in 2009, is being interpreted as an extended impulsive structure
– Within this period, the Elliott Wave analysis breaks the price action into multiple degrees, each comprising its own five-wave or three-wave formations
– The current count identifies that the index is completing a major five-wave impulse at Cycle or Supercycle degree
Detailed Breakdown of Wave Count
According to the analysis shared by EWM Interactive, here is the current wave configuration as of early January 2026:
– Cycle Wave I: Began at the bottom in March 2009, concluded in early 2020
– Cycle Wave II: The Covid-19 crash in early 2020 marked a deep and fast correction, interpreted as a sharp ABC correction
– Cycle Wave III: The longest and strongest rally started in mid-2020 and continued through 2022, characterized by successive impulsive sub-waves
– Cycle Wave IV: A deep but complex correction followed in 2022–2023, taking the form of a flat correction rather than a sharp selloff
– Cycle Wave V: Now in progress, which itself is subdividing into five sub-waves
Subdivisions of Cycle Wave V
Focusing on Cycle Wave V specifically:
– Primary Wave 1: Completed in late 2023, marked by a strong initial breakout from the Cycle IV low
– Primary Wave 2: A brief but noticeable pullback took place in early 2024, fitting the retrace pattern typical of wave twos
– Primary Wave 3: This strong leg higher unfolded throughout late 2024 and into the first half of 2025, matching expectations for an extended and high-volume Wave 3
– Primary Wave 4: A consolidated period of decline or sideways movement, completed sometime in mid-202
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