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Special Elliott Wave S&P500 Bulletin   

For April 17, 2009

Ananth Acharya

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The market performed as discussed in yesterday’s bulletin. Despite the early morning rallies into the 870 range, the S&P500 met some selling pressure at the end of the day which sent the market back down a tad. (Google which rallied $20 in the hour after the close only to give most of it back again was a further indication of this selling pressure).

Although, it is still unclear at this stage to call for a complete trend change, a change in the larger overall trend appears to be setting up based on the EW patterns we are seeing.

The current rally into the 870 range should mark the end of the Ending Diagonal (ED) (see Figure 2) and the Zigzag (ZZ) which started on March 6 (see ZZ-IM on left-hand side of Figure 1). As discussed yesterday, upward-trending Ending Diagonal patterns generally break down hard after Wave 5 is complete and prices have the potential to gap-down.

Figure 1 – Hourly chart of the S&P500 showing the IM-ZZ (Impulse-Zigzag) pattern from the March 6 low near completion. We have also drawn in the Ending Diagonal (ED) shown in Figure 2. The top ED trend channel line (magenta) is at 873.35 SPX which should mark the top of this current move. Chart provided courtesy of Refined Elliott Trader (RET) software produced by Elliottician.com   Data by eSignal.com

For April 17, 2009, we expect the S&P500 to decline to a range between 848 and 853. A decline below 845 however, would be accompanied by a relatively rapid drop in price to prior medium-term lows.

Figure 2 – Fifteen-minute chart of the S&P500 Index showing the beginning of the bearish Ending Diagonal (ED) from March 31 currently in Wave 5 and near completion. The market should turn in the same direction as Wave 2 in the ED when this wave is finished. The magenta rectangle shows the high probability area over the very short-term.  Chart provided courtesy of Refined Elliott Trader (RET) software produced by Elliottician.com   Data by eSignal.com

On the flip-side, if we get a broad-market rally and move above 880 on the S&P500, it would signal an ultra-bullish breakout requiring an alternate Elliott Wave take and a revisit of the current wave count. Stay tuned for our next installment!

For background on the Elliott Wave patterns we see on the SP500 please see our April 10 newsletter at http://tradesystemguru.com/content/blogcategory/34/68/#EW and refer to the suggested reading section below.

Suggested Elliott Wave Reading

Forecast Change for Elliott Wave Followers by Matt Blackman (SFO article explores recent EW research findings)

http://sfomag.com/article.aspx?ID=1218

Short Overview of Elliott Wave Principle

http://www.indiacharts.com/EW.htm  

Elite Trader’s Secrets by Richard Swannell (Free eBook)

ftp://ftp.elliottician.com/pub/ebooks/ERP1Results2003.pdf

Elliott Wave Principle by A.J. Frost and Robert Prechter

http://www.elliottwave.com/books/ewp/default.aspx?code=oco 

R.N. Elliott's Masterworks edited by Robert Prechter

http://www.elliottwave.com/books/rn_masterworks/default.aspx?code=oco

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