Dec 182011
 

S&P500 indexTwo things are clear from the attached chart. First, there is a reasonably good chance that we will go back and forth for a few more weeks, and it is possible that one particular rally will be relatively powerful. However, just when everyone starts to cheer, I suspect we will get some news that will be interpreted as detrimental to the market sentiment,and the index will come straight down to around 1020. Why is that? It is because of the way I have chosen to label wave A. It is made up of 5 waves, and we know that a correction cannot be made of 5s. We need to see a three-wave move.

Just for a moment imagine that I have labeled it all wrong, and the correction actually finished at the point marked A. What does that mean? It means we have embarked on a third wave, which should be steeper than the first wave. Also, the third wave should travel quite a distance! Given the current uncretainties in the market, this seems unlikely. Besides, the correction of the prior five wave rally that finished above 1350 seems inadequate.Thus, I am professing the view that we will see a move down to 1020 early next year.
Your next question is why am I anticipating a relatively powerful rally that will fail to live up to its promise? It is because the move that you see labeled in black as (a) was made of 5 smaller waves, and for the same reason I explained above, (that a correction cannot be made of 5 waves) we need to see a (c) wave posted. And because that set of (a)-(b)-(c) together is deemed a B wave of the next degree, we will see some traders left stranded up there. Let us see how all this turns out.
Happy new year, and best wishes to you and your families.

  21 Responses to “S&P500 Elliott Wave Outlook Dec 2011”

  1. Hi Ramki,

    Just a quick query. If time permits, please respond. Is it possible that we have seen a big Five wave down starting from 6300 in Nov’10 and now we may see a corrective wave up to atleast 50-62% of move from 6300-4630

    In you book, you have explained about the fifth wave which follows EXTENDED third wave. If I look at fall from recent 5400 (after diwali) and assume that in that structure 3rd wave of 5300-4640 was extended then guess fifth wave of that structure wgich can be calculated as .618*(distance of 0-3 measured downwards) and project it from recent 5100 (wave 4), again we get a fifth wave ending target of 4631.

    I guess this is the first time I have asked something, will be highly obliged if you can respond

    thanks in advance

  2. you are very good…..SALAAM

  3. Thank you Ramki.

  4. Interesting, you seem to be suggesting a bullish Q2 2012 for the S&P…. Do you have a count at a higher degree of scale, or is this as high as you like to go?

    • Hello Shabs, first of all I am not giving a time frame for the moves. Secondly, the main take away from my post is investors should be wary of any rally because in the bigger picture I am looking or a move down. Thanks for your comments

  5. Trevor,
    You asked “Ramki, During your last SPX update (& looking forward to the next), you chose to not show (b) at the late Nov low, which means that the next anticipated high isn’t (c) of B. Why did you use this labelling? In other words, why did you favour another high into Q1?” As I have often said in this blog, we shouldn’t be too much worried about the exact labels so long as the direction is correct. Imagine you have counted the late Nov low as Wave (b), then your potential wave (c) should have respected the guidelines and rules explained in my book. While this could still happen, the more important take-away from it all is we should not become a bull at the wrong time, a mistake that non-elliott wavers will commit. (of course I could be completely wrong, and come out looking foolish if the S&P stages a mega rally, but atleast I wont be poor if it comes off to 1020!). Why did I choose to label it the way I did? It is just Ramki’s count. Your count could be just as good, or maybe even better! Good luck.

  6. Hi !Wave A is a zigzag, and wave B could retrace more 61,8% from wave A?Thank you!

    • Valter, Wave A in my S&P chart is made up of 5 waves. When a correction STARTS with a five wave move, that move is probably the first leg of a ZIG ZAG correction. I suggest you revise the chapter on ZIGZAGS in my book.

  7. Hello Mr Ramki

    I have read your book completely and intend to read it again and again. I really like the fact that all the charts are recent and it really helps to look back and remember what happened. I had a few questions .
    1) I know from your book that it can be applied to any timeframe but if I am looking at the stock for the first time and want to start analyzing from the primary wave count what timeframes should I start and which timeframes are appropriate for which waves ie. primary, intermediate, minute, minute etc.

    2) The second question is regarding fibonacci drawing. I am taking class on fibs and learning that there are two ways the traders use fibs and one way is looking at the high and low of the swings and the second way is first figuring out the if the market is in expansion, contraction or symmetrical phase and then drawing the fibs considering the fact the grid should respect the market internals. I wanted to ask you which approach do u use in your practice to figure out the Elliot wave targets in your book.

    Thanks a lot again. Looking forward to read your book and follow your posts on your website because I can really relate to what I a reading by actually seeing it again and again.

    • Hi Pooja, I
      The timeframe to use depends on what kind of a trader you are. If you are scalping the market for a few points, then you can even use a tic chart. If you are a medium term investor, then a weekly chart is good. As for the fib ratios, I use the highs and lows as you can see from my work. Good luck.

  8. hi ramki

    this market is terribly resilient inspite of a 200 point bounce from the October lows.
    whats the outlook in january and antipating of a turn in the near future,
    i refence chris carolan’s lunar charts for january .. which is looking for a corrective turn soon. whats your take.

    http://spiraldates.com/2012/charts/sp500_010612A.png

  9. Hi Ramki,
    I would appreciate if you have any updates on the S&P and Dow Jones…

  10. Hi Ramki, I am new to technical analysis and have recently bought your e-book which I intend to complete before moving on to Prechter which is a difficult read. My main area of puzzlement is how identify the exact bar on a chart which marks the end of a particular wave. If I am using the 15 minute chart must I try doing this using a smaller time frame such as the 5 minute or the one minute. Also if there is a price spike in a bar and the next bar is more like the bar that preceeded the spike, do I ignore the spike, especially if it would mark the top of a wave if taken into account.

    Lastly do you provide an intraday commentary on the S&P 500 on a subscripton basis.

    Thanking you in anticipation, I will write a review of your book when I am finished.

    Best Regards,

    Gerry McEvoy – Dublin

    • Hello Gerry, Welcome aboard!Lets take your questions one at a time. Re the time frame to use, as you go down to smaller time frames, you will be able to see greater details about the subwaves that make up each wave of a bigger degree. Suppose you are looking at an hourly chart and determine we are in the fifth wave of a certain move.if you zoom down to the 5 minute chart, you will be able to see the sub divisions of the 5th in more detail.From experience, unless you are an interbank trader, it is quite sufficient to use the daily charts and try and capture the lager moves. Most individuals are unable to monitor the market as closely as professional traders, and frankly, fine tuning the moves too much is often undesirable because one will miss the larger move by trying to be too clever. Regarding how to handle a spike, it is often a matter of judgement. Sometimes a spike is real, sometimes it is just a bad tic, where a single trade might have been done at out of market levels. It is best to analyse using both the extreme level as well as the bar that is closest to the spike’s bottom/top. Then you will see how the fibonacci grid is respected elsewhere, and choose the spike if that seems to have had more turns in the past.Finally, I dont currently offer subscription service of any sort. WaveTimes is not selling anything, including my book (there is just a link for it). This blog exists just to share my knowledge with traders like you. Enjoy. Best of luck.

      • Hi Ramki,

        Many thanks for your reply, and so early in the morning from where you are!

        I am looking forward to an update on the S&P 500 whenever you decide to do one so as to compare my labelling attempts with those of an expert.

        Best Regards,

        Gerry McEvoy – Dublin

        • Hi Ramki,
          As mentioned I am in the process of reading your book and am currently at Chapter 8 Impulse Wave Extensions.

          Can you help me here please because my brain is melting because I seem to be caught in a circular argument as follows.

          To discover whether wave 1 in the large sequence is extending, we are looking to discover whether waves three or five in the lower degree are extending

          We already know that one impulse wave of either 1,3, or 5 must be extending, so does it not follow that any impulse wave 1 of a degree higher must be considered to be extending since it contains waves 1,3, and 5 in a lower degree one of which is deemed to be extending.

          I have probably mis-understood the point and would be glad of clarification.

          Best Regards,

          Gerry

          • Hi Gerry, Your understanding is correct. If wave 1 has a subwave that has extended, you will start with the premise that we have already seen an extended first wave in the next higher degree. However, the operative word in the text should be “at least one of the impulse wave is likely to be extended”. It is not unusual for you to see two extended waves in a cycle. About going in circles, yes, it is a bit confusing. Let us suppose wave 1 has an internal wave that extended. We assume that this is an extended wave in the next degree. Then we observe wave 3. Once it exceeds 161.8% of wave 1, we will assume that wave 3 is the extended wave in the next degree, and so on. If waves 1 and 3 are both normal, wave 5 is going to extend. Always remember one thing. ELliott Wave analysis is not a black box, or a set of rules that the market HAS to obey. On the contrary, WE should use the Wave principle sensibly to help us in our trading activity. When we follow the EWP rules, and take a position, we should enter when our theory tells us to enter. Again, we should exit when our theory is proved wrong. . This way, you trade with an edge. And wavetimes is all about this!

  11. Dear Sir,

    Thanks for your reply , and also thanks for update to getout from sort in Bajaj Auto.
    This is good suggestion for your comments which had u update in bajajauto, so the trader should exit from it and think about other stocks.

    Now i will come to the point that as per your s&p500 charts , it need 3wave to comedown@1020, but now s&p500 trading @1315 without any correction . So can u update more for that or we will believe that it doesn’t need to 3wave for deep and comes @1320 and in future it will comes @1020.
    Please update if u have time

    Regards,

    Prithvi

  12. Hi Mr Ramki if you can provide your valuable update for s and p when possible. Following a lot of blogs and everyone seems to be confused about when wave c will start. Just want to understand from theoretical perspective what is happening.

  13. Sir please update SP analysis in a short time

    thank you

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