S&P 500: Ending Diagonal (Rising Wedge) Pattern
It appears to me that the U.S. equities markets are in the late stage of an ending diagonal pattern (a.k.a. a rising wedge). In Elliott Wave theory, an ending diagonal (ED) is a terminal, 5-wave impulsive pattern which represents the "exhaustion" of a market which has "gone too far and too fast". Though an ED is an impulsive pattern and, as such, unfolds in 5 sub-waves, the sub-waves themselves develop as apparent 3-wave structures resembling corrective waves, and the 4th wave often overlaps the 1st-2nd wave region. These peculiar structural characteristics evidence the "gravity" which is weighing against the developing progress of the market. A good analogy might be a seedling which is trying to grow from beneath a stone: The organism's basic structure would still be apparent, though it would appear stunted and likely not survive.
Assuming this is an ED in the S&P and my wave count to this moment is correct, I have a target range for the termination of the 5th wave between 2144-2183.4. That is assuming that the 4th wave's bottom has been reached already at about 2041.
From that level, the 5th wave should rise theoretically no higher than 2183.4 (otherwise it would leave the 3rd wave as the shortest among waves 1, 3 and 5, which would be invalid).
The low end of the range (2144) is estimated based on the expected minimum post-triangle thrust (treating the 4th wave as a potential triangle) and assuming the triangle's wave "e" bounces at the lower trendline of the ED shown in my chart. It is interesting that the post- triangle thrust upward from the lower ED trendline (at the present time or very soon) would bring price quite flush with the upper ED trendline.
The 5th wave of an ED often overshoots the upper ED trendline. It is also interesting to note that the high end of the target range (2183) closely aligns with the price level at which the lower and upper ED trendlines will converge in early July.
If you see my post from about two months ago entitled "Thought-provoking S&P Pattern?" (link below), you will notice that the longer-term implication is that we are due for a peak high around 4/20/2015 based on a hypothesis of a repeating cycle of time-equidistant peaks and troughs.
If I ventured a guess as to what fundamental news might "explain" such price action, I might suspect the final spike in relation to corporate earnings reports turning out to be better than estimated after this weekend -- then followed by some unexpected volatility.
Assuming this is an ED in the S&P and my wave count to this moment is correct, I have a target range for the termination of the 5th wave between 2144-2183.4. That is assuming that the 4th wave's bottom has been reached already at about 2041.
From that level, the 5th wave should rise theoretically no higher than 2183.4 (otherwise it would leave the 3rd wave as the shortest among waves 1, 3 and 5, which would be invalid).
The low end of the range (2144) is estimated based on the expected minimum post-triangle thrust (treating the 4th wave as a potential triangle) and assuming the triangle's wave "e" bounces at the lower trendline of the ED shown in my chart. It is interesting that the post- triangle thrust upward from the lower ED trendline (at the present time or very soon) would bring price quite flush with the upper ED trendline.
The 5th wave of an ED often overshoots the upper ED trendline. It is also interesting to note that the high end of the target range (2183) closely aligns with the price level at which the lower and upper ED trendlines will converge in early July.
If you see my post from about two months ago entitled "Thought-provoking S&P Pattern?" (link below), you will notice that the longer-term implication is that we are due for a peak high around 4/20/2015 based on a hypothesis of a repeating cycle of time-equidistant peaks and troughs.
If I ventured a guess as to what fundamental news might "explain" such price action, I might suspect the final spike in relation to corporate earnings reports turning out to be better than estimated after this weekend -- then followed by some unexpected volatility.
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