Weekly $SPX Outlook

The S&P 500 has recovered from the January sell off which happened to end at a Gann Level of 1057 and has now taken out the previous high.  Using the same Gann analysis that supplied us both the January high and the early February low we can take a look at what levels are next.

 

The next two levels which could provide resistance for this latest rally occur at approximately 1185 (Red 1X1) followed by the larger Weekly Resistance of 1220 (Blue 2X1).  Both of these levels could indicate another sell off in the $SPX.  

Now that we have a few levels to where this rally could end, lets take a look at the Elliott Wave Pattern of the Weekly Chart to try and get a sense of overall market direction. 

 

The rally that we are seeing is labeled as an Elliott Wave 4, but upon closer inspection and following the rules of the Elliott Type I Trade setup we can see that the PTI is less that 35 and the rally has passed the Red Wave 4 Channel.  This is gives us evidence that the Wave 4 is suspect and the chances for a new Wave 5 Decline are remote.  In an instance such as this we can adjust the Wave Count to get a more up to date pattern taking into account the Wave 4 is not following the normal patterns.  To do this I am going to use a feature of Advanced GET called "Localize Elliott."  Since the Elliott Pattern looks normal up to the current Wave 4 I will choose the Wave 3 low as my localization point.  After localization the count looks like this.

 

Under normal circumstances you will not need to localize or change the counts in the software.  In this case we have evidence that the market is no longer following the normal Wave 4 rules so we are essentially "fast forwarding" the wave count to get an up to date look.  This can be done on any chart where the Wave 4 rules are broken.  Taking into consideration what we know on this chart from both Gann and Elliott we are still looking for a sell off based on the Weekly time frame. The difference is that we expect the sell off to be a Wave 4 retracement as opposed to a Wave 5 with new lows.  And the projected tops would be the 1185 and 1220 Gann Levels I described earlier.

Ron Wheeler

eSignal Learning
  
 

Comments

[Peter]

Great post Ron - really appreciate the effort and examples on how to expand the use of the GET.

[Barry]

I don't think localizing Elliott is the solution. If so, how do you account for the price oscillator being as large as it is prior to W1? I think the computer has it labled correctly. However, because of the violation of the red channel, I think you are correct in that we will see a failed w5.

[Samir Ghadiali]

Hi Ron,
Great post. Just watch $nifty-nse weekly chart for clear w5 path maybe same thing going to happen in US market as Indian market out performing since last march 09 & making early path for rest of world mkt charts since march09
please guide.

[Vijay]

Has anybody looked at the SPY on the daily chart? Looks like it is setup for a Type 2 Sell ?

Any comments

[Samir Ghadiali]

Vijay,
please also check $nifty-nse daily and you get another story and another example of future path for $spx
Any comments?

[David]

Regarding Spy Daily, I dont see there is any divergence, so type II sell is not valid..am I right..

[steve brophy]

Ron:
Thanks so much for covering that. I have been looking for an explanation for a long time!
best
Steve B

[steve brophy]

But I would also respectfully add that we shouldn't have to spend $2000 to learn Gann through a seminar if you are going to make it an important tool of the software. It should be included in the original expensive package. Gann is in the name after all! GET equals GANN AND Elliot wave.

[Vijay]

David,

You have to go back far on the oscillator but there is a divergence albeit small; dont konw if its strong enough that i would take the trade though

[Ron Wheeler]

In response to some of the comments...

I agree, the current wave is still "Technically" correct as the Elliott Rules of a Wave 4 have not been violated (taking out the previous 1). We localize to get an idea of what the new count would look like. Remember even if the Wave 4 is still valid, we have evidence saying new lows are unlikely.

As far as the daily. There is still a Type II Sell as there is slight divergence. The question is do you take it with this evidence on the Weekly. I say yes. If the weekly is approaching a Wave 3 top there should still be a correction coming (wave 4), one that could be profitable off the daily.

[samir ghadiali]

Ron,
I continously written that we are not in wave 4 in $indu as well as $spx in weekly. Just check $compq & $nifty-nse for further confirmation so $indu & $spx follow it?
Please guide

[sujal]

friends i am planning to gor for it should i ?

[Puma Outlet]

thank goodness for rule breaking! I love your page.Thank you for another great article.so you are allowed to change them whenever you want.