Firstly, I would like to stress that I am not a professional trader, and I cannot even say that I am very experienced. Therefore, please take this post with the appropriate amount of skepticism.
tl;dr look at the chart, pure TA, no fundamentals
https://www.tradingview.com/x/4tFIdvdm/
While browsing my news feed, I stumbled upon someone implying that the stock market “crash” in 2022 was the first impulse wave (Elliot wave) down and that person expects two more waves to come. Therefore, I decided to look at the S&P 500 chart myself, and I think I found the scenario the person was talking about. I decided to share it here for discussion and contemplation.
The main points are explained on the chart, which is basically a summary. The text below provides an explanation of the chart.
The S&P 500 index is currently moving within the trading channel, with room for growth. The RSI is not too high, and the moving averages are bullish. The cyclic lines (pink dotted vertical ones) show that somewhere in the second half of May (20-24), the S&P has to make a new higher low according to its movement in the channel, and thus a new higher high will be approached soon (somewhere in early May, perhaps the first week). The RSI is clearly moving towards the “overbought” zone and looks like it might get there around the same time. If it does, it will confirm that the index is going down.
The critical point is the point in the second half of May (the cyclic line falls exactly on May 22) where the S&P 500 hits the trading channel bottom. If it goes down, two support(ish) levels remain: one is the VAL (value area low) green horizontal line, and the other is the Fibonacci retracement line 0.786 (horizontal light blue). The trading volume between them is “relatively” high, but if the index breaks 3775 points, it basically enters freefall. According to the Elliot wave “rules,” wave (3) is expected to extend wave one by a ratio of 1.618:1. Therefore, a possible end of wave (3) is at Fibonacci retracement 1.618, which is around 32% down from the critical point. Trading volume plays an important role here. Since selling volume has been growing, it can be expected that if a breakdown happens, it will be on high volume. However, if volume remains low, then this whole scenario becomes very unlikely.
If the scenario plays out, I can see that wave (3) will end somewhere in late July or early August 2023. After that, I did not bother to look at anything else. Definitely, a corrective wave (4) and third impulse (5) will happen, but where and how big is hard to tell. Perhaps wave (5) will end on price levels just above 2000 points. If the critical point is broken, then a possible triangle pattern might play out, and the price target would be vaguely around 2089 points.
I am in the process of looking at different economical indicators, hence I cannot provide any fundamental analysis to back the hypothesis up with or to disapprove it. Also, I didn't quite take into account any bigger companies' reports or financials here. It is purely TA.
Any comments (including TA mistakes) or thougths are welcomed. 🙂
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