Longer-term Elliott Wave Count

The reason this blog has been slanted towards the “bearish” view on equities is perspective. I am not a short-term trader. The time frame that drives my overall view of the market is the weekly and higher time frame charts.

Today I present my Elliott Wave count on the weekly cash S&P500 from the all time high set in 2007. When viewed from this perspective my objective rules tell me that the trend is still down. In fact, those rules indicated that the trend turned “sideways to up” on 7/27/2007 and then “down” on 1/4/2008. Except for a brief “sideways to down” period from 5/23/08 – 6/27/08, the trend has been “down” since then.

However; some of my other work is now pointing to the possibility that although the downward Elliott Wave pattern is not yet complete the low for the year (not the ultimate bear market low) may have already been registered. Once the current rally (from March 6) ends the wave 4 Expanded Flat pattern from the November 2008 low will be finished. We would then need a wave 5 decline that ends the pattern from the May 2008 high. This decline would ideally end below the prior wave 3 low of 741.02 but does not have to move below the “b” wave low of 666.79.

In sum I still view this rally as the bear market variety but will be watching the next pullback very carefully to see if we can successfully retest the March low. And what of that next pullback?

On the daily chart we are at resistance right now. If we get through it he next target to watch is the 865-870 area. We will know that a serious pullback is underway if we break the Beta – X trendline shown in my previous post.