Investors have been expecting the U.S. stock market to crash for years.
It seems the 2008 financial crisis and related market decline damaged investors’ psyche, and they’re always thinking the next disaster is right around the corner. Unfortunately, many of those investors have made no money in the past several years or, worse, have lost a lot of money shorting the market, betting on a drop.
At the end of the past week, I have begun to hear people talking about how the market is about to “take off” again in a big way. However, I was looking for the market to do just that in early 2016, and we are now approaching the topping target we set for this segment of the rally we expected back in early 2016. In fact, for those viewing my charts during that time, you would know the chart had a blue box target between 2,487 and 2,564 on the S&P 500 SPX, -0.01% since last year for this segment of the rally. At this point, it looks like we may only attain the lower end of that target region.
As you can see from the attached charts, below, as long as the S&P 500 maintains support over 2,440-2,445 early this week, we still have a pattern in place to head toward our target region above. The pattern suggests it could take as much as three weeks until it completes into that target. Moreover, Luke Miller, who runs one of our proprietary timing models at Elliottwavetrader.net, notes that there is a potential timing target around Aug. 9 that can mark a larger-degree top in the market. (Luke’s timing model called for this current rally in the S&P 500 over a week ago.)
Ultimately, the closer we get to our target overhead, the higher the risks rise that we will finally see a larger-degree pullback. My target for the next pullback in what we have labeled as wave (4) is projecting down in the 2,285-2,330 region on the S&P 500. Yet that pullback will likely be a buying opportunity, as I still expect the market to rally to at least the 2,537 region, and potentially even exceed the 2,600 region before we see a 15% to 20% correction, likely starting in 2018.
See charts illustrating the wave counts on the S&P 500.
The writer has no holdings in the securities mentioned.
Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net, a live trading room featuring intraday market analysis on U.S. indices, stocks, precious metals, energy, forex and more, along with an interactive member-analyst forum and detailed library of Elliott Wave education.