Last night I mentioned some intraday and closing price levels on the S&P 500 that would serve important roles in determining the current course of the market. The S&P 500 rallied up to the 61.8% intraday retracement level at 1522, and then wound up closing at the 61.8% closing retracement level at 1518. This has given us a nice proportional retracement of the initial thrust downward last week.
Given the five-wave structure of that initial thrust downward that appear on the hourly chart, it would seem probable that another downward thrust remains. My reasoning for this is one of the more basic principles from Elliott Wave Theory, which tells us that an initial five-wave formation will always be followed by at least one more five-wave formation. Elliott Wave Theory would suggest to us that the very least we can expect from our current structure is a 5-3-5 zigzag pattern down.
Should the second thrust down equal the length of the initial thrust then it will have a length of 23.53 on an hourly line chart. If the Tuesday high should prove to be the end of a corrective wave higher, then the next phase of downward movement should extend to around 1496.71. We might also look toward the low set on the open of May 11 at 1491.47 as significant support.
I would look at the 1496.71 number as important. If this downward movement is just some sort of short-term correction, then that will be the important number. This is because in corrective zigzag formations the lengths of the two thrusts down tends to be equal. If we see the S&P 500 extend down to the 1491.47 level, then that would be more suggestive that thiese waves are part of a larger structure.
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