S&P500 update: more down or first up then down?

Every trader and investors always wants to know what’s next for the financial markets as to position themselves correctly for the next trade. Most, rightfully so, seek advice from skilled, experienced, and knowledgeable market analysts to determine what’s MOST LIKELY next.

Luckily I’ve been able to help my premium members, which include some larger private investment firms (!), be on the right side of the trade most of the time as I’ve been looking down for the last few weeks. The hourly chart below for the S&P500 shows how in the short-term I’ve been able to forecast most price highs and lows correctly.

Fig. 1 S&P500 hourly chart: all forecasted price targets reached.

So far so good. From an Elliott Wave POV this means the current downside could be nearing its end as price is getting very close to the wave-iii/c of wave-3/c target zones. Why do I label the current price action as both letters and numbers? Because to remain intellectually honest one must as an Elliott wave practitioner always label waves initially as either corrective (a,b,c) or impulsive (1,2,3) until one of the two is disproved because nobody knows with absolute certainty beforehand what the market will do: move in three’s (a,b,c) OR in five’s (i,iii,iii,iv,v) be it either up or down.

So as the markets are wrapping up what appears are some final smaller 4th and 5th waves, which can reach as low as SPX2700 but not necessarily, one needs to ask “But what about the bigger picture?” because not everybody trades the (very0 short-term charts.

Well, my preferred view is that the markets are in a larger Primary-IV wave, in the form of a flat-correction, and which should consist of three smaller waves: a, b, c. In this case the December low was (black) wave-a, the recent SPX2954 ATH wave-b, and price is now in wave-c back the December lows.

Fig 2. S&P500 daily chart with bigger picture Elliott Wave Count

How exactly this wave-c will unfold nobody knows with certainty beforehand. We do know that C-waves often consist of five smaller waves, so that is what we can anticipated, but it is not necessary. Hence, either the market will follow a pattern along the green arrows, or something along the red arrows. See Figure 2 above. This means the current downside could move lower and deeper inside the green 3/c target box (SPX2730-2650; as shown on the hourly chart as well), or it has (soon) ended and we can expect some upside before (SPX2750-2825) heading (much) lower again (SPX2450-2400)

Now you might think this is not of much help, but it simply means: a) downside potential is shorter-term becoming more and more limited vs upside (bounce) potential; b) it’s unknown how high the bounce will go; c) expect more downside once the bounce is over.

So, when uncertainty is something you find hard to deal with but unfortunately it’s the only thing we have for certain as markets are non-linear, stochastic and probabilistic in nature then a proven price-based trading system is one way to go: On May 20th I launched my new trading system (PMTS) for my followers on my private twitter trading feed and it is already up 8.4% while the S&P500 (per the SPY) is down 3.4% using my short-term (for SPXL/SPXU) system only. Check it out and give it a try I’d say.

Private Twitter Trading Feed Portfolio Performance since PMTS went live on May 20, 2019

Arnout, Ph.D.


Founder and President Intelligent Investing, LLC 
Vice President NorthPost Partners, LP

Leave a Reply