A review of the possible Elliot Wave counts.

With the markets falling out of bed this beautiful Monday morning, you may wonder what is going on. Thus now is the time to review what options we have available and which door we should pick.

Here a comprehensive review of the currently most popular Elliot Wave counts available is given. I’ll go over what I believe the odds are for each count to determine which option is most likely.

30% odds: The most Bullish option is a set of nested 1st and 2nd waves, with minor wave-2 of intermediate-iii almost complete or complete. It fits with the MACD and with the Money Flow Index which have been making higher highs, as price made higher highs. On the micro-scale, price dropped to the 76.4% retrace of minor-1 (SPX2677->2791: SPX2704) today, and that’s still a very acceptable, albeit deep, retrace for a 2nd wave. Any move lower and especially below SPX2700 will bring the next Elliot Wave counts (back) into play. Given the available data, the fact the NDX has completed a nice impulse up (see here), the DJIA is close to a significant bottom (see here) this count is highly likely.

SPX Daily TI alt 2

30% odds: The 2nd most Bullish option is that the S&P completed a leading diagonal intermediate-i wave up, and intermediate-ii is now underway. It should ideally bottom at around SPX2680, which is prior -minor wave-4– support and another retest of the 200d Simple Moving Average. Hence, if this option is operable than price is already very close to completing wave-ii and the downside risk vs upside reward is 30p vs possible up to 480p… Given the available data, the fact the NDX has also completed a nice impulse up (see here), and the DJIA is close to a significant bottom (see here) this count is also highly likely.

SPX Daily TI alt 4

20% odds: Another possibility, which others are tracking, is that the leading diagonal 1st wave (intermediate-i) is not even over yet, and all we’ve experienced so far is the 3rd wave and the 4th wave to ideally around SPX2700 +/- 5p is now underway. Wave-5 should then target around SPX2850-2875 before wave-ii drops price back to where we are now. Also for this count, the upside reward is at current levels much higher than the downside risk: ~150p vs 15p… And, this count fits with the NDX having also complete wave-iii of an impulse and now in wave-iv (see here), but there’s not enough data available yet (no signs of a 5th wave up or a confirmed lower trend-line for support) to fully support this case. Hence, I view this Elliot Wave count as somewhat less likely until proven otherwise.

SPX Daily TI alt

15% odds: The above three Elliot Wave counts all assume major-4 is already complete and major-5 is underway. But, there are still two options left that consider major-4 as still ongoing. The first one, albeit not that bad since most of the downside is about done, is a final e-wave of a large triangle now underway targeting around SPX2680 (30p downside risk vs 300p upside reward). It is still possible, but doesn’t fit well with the NDX for example, and thus I find it less likely. A break below SPX2680 will bring us to the last possible option.

SPX Daily TI alt 1

5% odds: The last option is the usual “Bear-Porn”, which has never worked in this Bull since 2009, and has now a massive-c underway targeting as low as SPX2450 for all of major-4. Since this is the least likely count (for many reasons, besides the fact it doesn’t rime with the other indices, or simple because the wave-count is rather construed to make all the waves fit) I won’t spend much time on it, other than we need to see a break below SPX2600 for me to consider it. But, since we can’t dismiss any option, even if low odds, I must present it to remain intellectually honest.

SPX Daily TI alt 3

I hope with this post I’ve been able to provide a fair and honest review of what I view are the most to least likely Elliot Wave counts.

Arnout, Ph.D.

2014-06-10 17.07.27-small

Founder and President Intelligent Investing, LLC

Vice President NorthPost Partners, LP

 

You can find some of these Elliot Wave counts, and possible even others, of course on my own website as well as that on others:

https://investingintelligent.com/market-update-archive/
https://www.elliottwavetrader.net/marketupdate/ and https://twitter.com/ZacMannes
http://www.pretzelcharts.com/
https://caldaro.wordpress.com/
http://practicaltechnicalanalysis.blogspot.com/

 

 

Leave a Reply