Executive Summary
- SP500 corrects lower in a fourth wave
- Support likely emerges above 4600
- Anticipate new highs later in the calendar year or early in 2025
SP500 Corrects Lower in Wave 4
The correction lower that began July 16 in SP500 is wave 4 of a larger 5-wave bullish impulse pattern. This pattern implies the correction is temporary and that new highs would eventually appear under this count.
Taking a step back, my colleague Zorray’s Junaid nailed the target for the top of wave 3 in his Q3 Equities forecast dated June 29. He cited a target zone of $5661-$5853 and the SP500 top ticked at $5678.
We can forecast a potential path for wave 4 based on wave’s 2 & 3.
First, wave 4 tends to alternate in shape relative to the shape of wave 2. Wave 2 was a flat pattern, so wave 4 would likely become a sharp zigzag or triangle pattern.
A sharp zigzag pattern (black path) likely retraces to the 38-50% retracement of wave 3. This places a target down near 4600-4900. If a triangle (red path) is developing, then, prices likely grind sideways for the next couple of months making very little progress in either direction.
Let’s see how prices behave relative to this week’s low.
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