WaveTrack International

Elliott Wave Financial Price Forecasting

SP500 and Nasdaq 100 – Two Different Corrective Patterns – Same Message!

by WaveTrack International| April 20, 2018 | 10 Comments

SP500 – Nasdaq 100 – 1st Wave Of Ending-Diagonal!

The April 2nd / April 4th lows ended expanding flat corrective patterns that began from the February 27th highs. These lows formed at 2552.00 for the SP500 futures contract and at 6306.75 for the Nasdaq 100 futures. These patterns were labelled as ending sub-minuette wave (b) within February’s larger degree zig zag upswing – see fig #1. Following advances begin wave (c) which itself must develop higher whilst unfolding into a five wave impulse pattern, extending above the Feb. 27th highs of 2789.75 and 7009.00 respectively. So far, so good!

SP500 and Nasdaq 100 - Comparison!

SP500 and Nasdaq 100 – Comparison!

SP500 and Nasdaq 100 – Two Different Patterns?!

But taking a closer look at wave (c)’s upside progress from those April 2nd lows reveals two different corrective patterns ending into last Wednesday’s highs. A double zig zag for the SP500 (see left) and a single zig zag for the Nasdaq 100 (see right). How can that be? Surely, the advance must unfold as a developing five wave impulse pattern, i.e. 1-2-3-4-5? Perhaps this is a series of 1-2’s, you know, a five wave ‘expanding-impulse’ pattern which begins 1-2-1-2 etc. And then expands the price action with a 3rd-of-3rd wave surge to the upside. That could still happen. But if so, why have these indices dropped away from Wednesday’s highs? A 3rd-of-3rd wave should be propelling price action higher, not lower.

Furthermore, look at how these overlapping price-swings have adhered to fib-price-ratios that depict corrective sequences. For example, if the S&P has developed into a double zig zag, then extending the first from 2552.00 to 2672.25 by a fib. 38.2% ratio projects a terminal high for the secondary zig zag exactly into Wednesday’s high at 2718.50. Extending wave ‘a’ of the Nasdaq 100’s initial upswing from 6306.75 to 6654.50 by a fib. 61.8% ratio projects a terminal high for wave ‘c’ to 6878.75 – the actual high was 6867.00.

SP500 and Nasdaq 100 – The Puzzle Solved

The only obvious answer to this rather intricate puzzle is that wave (c) is unfolding higher, not as an expanding-impulse pattern, but as a diagonal-impulse pattern, specifically, and ‘ending’ type diagonal. The wave labelling of the two impulse patterns remain the same, [1]-[2]-[3]-[4]-[5], but in an ending-diagonal, waves [1]-[3]-[5] have a tendency to subdivide into ‘threes’, zig zags or multiples, i.e. double zig zags or even triples. This explains why the advances have unfolded into a double zig zag and single zig zag for these two indices.

What Next?

Firstly, with wave [1] ending into last Wednesday’s highs, wave [2] is now underway as a corrective decline. Second wave retracements are usually sharp and steep affairs, so watch for a sudden sell-off over the next few trading days. But ultimately, wave [2] will end above the April 2nd / April 4th lows, then resume higher afterwards to begin wave [3].

Conclusion

We already know that market watchers are mystified over recent price-swings and can only stand aside with expectations of more volatility. But from an Elliott Wave perspective, we gain an intimate view of price-progression in a way no other financial system can operate – that’s because it is completely suited to non-linear dynamics, the DNA and the heartbeat of the markets’ character.

If you haven’t already subscribed to our bi-weekly Elliott Wave Compass report and are actively watching or trading the markets, then do join our growing community – we have the answers you seek!

Comments

  • Jay Sanderson

    I’ve seen some EW counts showing a 3 of 3) to the downside starting. is that viable in your opinion?

  • Hello, Thank you for your question. It is indeed a big testing ground for the Elliott Wave principle. We don’t believe a 3rd-of-3rd is
    viable to the downside at the moment – why?…consider this – the S&P’s
    February upswing from 2532.69 unfolded into a five wave pattern, ending Feb. 27th
    at 2789.15 – the following correction unfolded into a 3-3-5 expanding flat that
    ended into the April 2nd low of 2553.80 – these two price swings are
    part of a developing 5-3-5 zig zag upswing, i.e. (a)-(b)-(c) – wave (c) must
    now unfold higher from the April 2nd low into another five wave
    pattern – our original concept was that this would unfold into an
    ‘expanding-impulse’ because these are more common – a good example of an
    expanding impulse is wave (a)’s advance last February – one of its impulse
    sequences, i.e. its 3rd wave ‘expands’ the price action, giving it
    an archetypal formation – but the April 2nd impulse is not the same,
    it is now taking the form of a five wave ‘diagonal-impulse’ pattern,
    specifically, an ‘ending’ type diagonal because it is in the location of wave
    (c), ending the zig zag – which means its subdividing waves [1]-[3]-[5] have a
    tendency to unfold into zig zags or multiples, i.e. double/triple zig zags,
    which is why you are seeing this develop from the April 2nd low,
    ending into last Wednesday’s high – this completed wave [1] of the diagonal –
    to prove this wave count is correct, wave [2] declines must end above the April
    2nd low, then turn higher to resume the diagonal…so this downside
    test will prove this count either way- PG.

    • Praveen Vishnu Shamain

      Dear Mr. Peter,

      Please find attached the chart (which also refers to 3 of 3 starting), which might be what Jay Sanderson was referring to.

      https://4.bp.blogspot.com/-_MkQT52NW5s/WttRh6FmlRI/AAAAAAAANdE/un9LBlECrx0Nyrw3HNusvCutz7Pa5rnBQCLcBGAs/s1600/20180420b.png

      P.S. – Please note that attached chart was a publically available on Internet

      • Thank you, Praveen Vishnu Shamain, as always! We will send your info to our EW-team and depending on their time schedule send a responds by Tuesday. Have a wonderful weekend!

        • You are lucky! We already received a reply from Peter Goodburn.

          Hello Praveen Vishnu Shamain – thank you so much for taking the time to add the link for the chart – it is similar to how I interpreted Jay Sanderson’s description of an accelerative 3rd-of-3rd wave decline beginning now – first observation is that the five wave ‘expanding-impulse’ advance that began from the grand ‘resynchronisation’ lows of Feb.’16 remains incomplete – this is open to interpretation for the S&P 500 but in previous reports (& annual videos), we’ve shown how the January high is only a 3rd wave peak when comparing with the pattern structure of the S&P 400 mid-cap and the Russell 2000 small-cap indices – if correct, then it would exclude a 3rd-of-3rd wave decline now…although we could consider whether January’s decline is ready to begin wave [c] of a zig zag now, or later as we believe more probable for the reasons stated in my earlier reply – one other observation – in the chart from the link you provided, the weakest aspect of this count is the upswing from the early-February low – it labels a double-three into the March high – that in itself is okay even though these patterns are very rare and should only be used as a ‘last resort’, but when the mid-February upswing occurred, this was unquestionably a five wave impulse pattern unfolding in the Nasdaq 100 ending on Feb. 27th where the Nasdaq 100 made a new higher-high – replicating that pattern (the double-three) just doesn’t work with the Nasdaq 100…the true path to price development is to find how to sync all indices together…oh, one final thought, in the double-three upswing, this is labelled as an expanding-flat-x-zig zag…wave ‘c’ of the expanding flat must subdivide into a five wave impulse pattern, but only three waves are evident in the price-data…there are no fib-price-ratios added to help ‘validate’ the count, especially within the Feb/March period which leaves the door open to a lot of ‘interpretation’ – thank you so much – PG

          • Praveen Vishnu Shamain

            Wow !!

            Mr. PG works on Sundays too? 🙂
            Simply incredible !

            Thank you so much. Mr. PG has answered so many questions and clarified so many doubts.

            GOD bless him and entire WaveTrack team !

          • You are most welcome. Peter is always happy to answer interesting questions – even on weekends. It is always a pleasure to connect with fellow Elliott Wave enthusiasts. Have a wonderful weekend & God bless you!

    • Jay Sanderson

      Unless SPX can regain 2660 it appears wave 3 may be correct?

      • So far S&P 500 and Nasdaq 100 have responded to fib-price-ratio measurements that depict zig zag declines from recent highs – whilst indices are above April 2nd lows, the outlook remains bullish. Best wishes.

  • shushumiga

    I do not want to be rude, but I want to suggest another solution for this puzzle – your triple nested expanded flat is wrong and the corrective move up proves it. Have you thought about that?
    With ED SP500 and NDX will not move even close to the mid-March highs.

About WTI

WaveTrack International is a financial price forecasting company dedicated to the Elliott Wave principle and work of the R.N. Elliott. Clients include Investment Banks, Pension Funds, Total/Absolute-Return/Hedge Funds, Sovereign Wealth Funds, Corporate and Market-Making/Trading institutions and informed individuals -- & just about anyone who is affected by directional price change.

Subscribe to our feed

WTI Links

Search