Here’s Mish’s Elliott Wave analysis, after the rally on Tues, continuing a discussion in which he suggests that we will have a wave 4 up before a larger wave down in the future.
S&P 500 Crash Count – Wave 3 Update
If you are just tuning in, this post will not make a lot of sense unless you first read S&P 500 Crash Count. Inquiring minds (especially long term buy and hold types) will also want to check out S&P 500 Crash Count Compared To Nikkei Index.
Here is an update of the S&P 500 Elliott Wave Count.
Wave 3 May Be Complete
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The crash wave (wave 3) may be complete. Technically today’s massive rally could still be a part of wave 4 of 3 up, but judging from the action in other indices, the most likely count is that wave 3 is complete.
However, we have seen several massive one day wonder type rallies fail during wave 3. So this count, while likely, is by no means certain. The weekly chart may make things more clear.
$SPX – Weekly Chart
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IF wave 3 is complete (Red Numbers) then by definition wave 4 up has started. Then IF wave 4 retraces 50% of the wave 3 of 3 down, see the Fibonacci lines in the first chart, there may be quite a bit of rally still ahead.
Putting this all into place, the action would look like this.
$SPX Monthly Chart
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A healthy pullback followed by a close above Tuesday’s high will make it more likely this count is indeed the correct one.
