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The S&P500 Reached its Symmetry Target of 3950: What is Next?

Dr. Arnout Ter Schure
·2 min read

From late-August to early-November last year, the S&P500 index (SPX) traded between SPX3590 and 3230. A 360p range. See Figure 1 below. By mid-November, it finally managed to break out, hold the breakout, and rally with a few pullbacks along the way. Notably, the most recent ~160p correction, which ended late-January.

Markets love symmetry because we humans love it, e.g., we are most attracted to people with symmetrical faces. Since the markets are driven by human sentiment, it is no surprise markets try to achieve symmetry.

Thus, if we add the 360p range to the breakout level of SPX3590, we get 3590 + 360 = 3950. See blue arrows in Figure 1 below. In November, I told my premium major market members this level would be reached. The exact path was, of course, impossible to know beforehand and frustrating at times, but today it was finally achieved: bingo. So what is next?

Figure 1. S&P500 Daily chart with technical indicators and horizontal support/resistance levels.

Using Elliott Wave Principle to Answer the “What is next? question.

Before answering the question, let us review the daily chart once is more. Price is in an uptrend channel: Bullish. Price is above its rising 10-day Simple Moving Average (SMA), which in turn is above the rising 20d, 50d, and 200d SMAs. A 100% Bullish setup. All the technical indicators are on a buy: Bullish. Thus, before we all get too excited, there is no reason to look down if the charts remain Bullishly setup. A first warning will be on a close below last week’s low.

Namely, my detailed Elliott Wave Principle (EWP) count has the index complete a 3rd wave, and a move below last week’s low means the last smaller 5th wave of this 3rd wave up has completed and a wave-4 will be underway. See Figure 2 below.

Figure 2. S&P500 hourly chart with detailed Elliott wave Principle count.

This wave-4 will then ideally target SPX3770, but it can also move as low as SPX3670. A typical 5-8% correction, in other words. The lower price target would fit with the red dotted arrows in Figure 1. A symmetrical correction equal to the October 2020 correction would move my EWP count to a one-degree higher wave. Thus, the daily chart and EWP count in the hourly chart align with my recent article, where I show the current low volatility would most likely be followed by a period of high volatility.

Regardless of which wave-degree is operable, both EWP counts tell us to expect higher prices once the pending correction to SPX3770-3670 is over. Based on the “80/20 rule,” we should expect SPX4200s before the next larger correction, possibly a much larger top of the Super Cycle degree will commence.

This article was originally posted on FX Empire