S&P500 at an inflection point

The Elliott Wave Principle (EWP), a key part of technical analysis, provides our premium members with a framework for identifying reversals and emerging market trends. For example, thanks to the EWP, we knew a year ago that this larger correction we are currently experiencing was on the way. Specifically, we already forecasted on April 3 last year that the index would drop to around 5110, rally to 6740-7120, and then fall back to 5500-6120.

Fast forward to today, the index hit its low on April 8, 2025, at 4910, then rallied to 7002 on January 28, and reached a low of 6316 on Monday. This demonstrates remarkable foresight and helps us stay well ahead of others caught in the daily grind.

Intermediate-term Elliott Wave count for the S&P500

The good news is that, thanks to the EWP, we recently realized that as long as the 6780 level remained intact, the index still had a final chance at 7120. It tested the 6780 level a month earlier this year, marked by the red dotted horizontal arrow in Figure 1 above, causing some uncertainty until it finally fell below it in early March. That was our signal for the larger W-4, which is currently unfolding.

The main issue is that tracking an overlapping correction (waves A-B-C) daily often requires frequent adjustments of the EWP count, as “an ABC can morph into ABabc, etc.” Additionally, in this case, the waves exceed normal-length parameters, so the daily target is adjusted more frequently than we’d like. This can cause frustration, disbelief, and a loss of patience. However, this is the unfortunate reality of the short-term game, especially when sailing in stormy waters like we’re experiencing now, since the short-term is noise, the intermediate term offers structure, and the long-term sets the trend.

To overcome these challenges, remember that no technical method is perfect, and even the EWP requires flexibility and patience. Being adaptable is essential during unpredictable times, and following a disciplined process can help lessen the emotional ups and downs caused by quick market shifts.

So, we should focus on the positive aspects of the EWP because it is most effective in the medium- to long-term. Since we accurately anticipated this correction a year ago, we can trust the current analysis too. Nothing has changed; it’s just easy to get caught up in the day’s negative hype.

Additionally, during corrections, technical analyses are generally less reliable than during rallies, as shown by our analyses from last week: the index reached the 23.6% retracement and showed a single positive divergence on the SP500’s McClellan Oscillator (SPXMO), a market breadth indicator. This suggested that the minimum requirements for a larger bounce had been met. However, that bounce did not occur, as the index dropped below the March 20 low, which we knew “would then target the mid-6300 level before the Bulls can start again.” Usually, market breadth is more influential than seasonality, but not this time, since a midterm election-year low often occurs around March 31. See Figure 2 below.

SPXMO now vs 2020 and mid-term election year seasonality

Our EWP count for the S&P 500 indicates that the initial drop, red Wave-a, continued down to yesterday’s low of 6316, which is near the next common retracement level, the 38.2% of the rally that began last April at 6216. Additionally, the SPXMO now shows a double-positive divergence, similar to what occurred during the COVID-19 crash in 2019, suggesting underlying strength despite recent price declines. See Figure 2 above. Moreover, the mid-term election-year seasonality low around March 31 was most likely set yesterday, March 30. Thus, the W-b rebound into the April 18-28 time frame is now underway.

Looking ahead, if the current retracement and breadth signals continue to hold, the S&P 500 is at a critical turning point, paving the way for renewed upward momentum in the weeks after the expected March 31 low, with a target around $6800.