The S&P 500 had its worst week since the middle of February. Last week the index managed to reach 2100, which gave hope to the bullish majority, but eventually fell sharply to 2051 on Friday, April 29th. Most market participants are searching for “the Holy Grail” of forecasting methods, in order to be able to predict every single move the market makes. This is impossible and we are not going to tell you that the method we use – the Elliott Wave Principle – is flawless. What we are going to show you is how to use it responsibly, in order to get proper and usually correct analysis. That is exactly what our premium clients received last Monday, April 25th.(some of the marks have been removed for this article)
That is how the S&P 500 looked like before the market opened last Monday. As visible, we assumed the price was likely to decline to the green line, connecting the previous swing lows. Instead of blindly relying on the uptrend, the Wave principle allowed us to prepare for the upcoming weakness. The above-shown chart was all that was needed to make that forecast. The updated chart below shows how the situation developed.
As you can see, the last top at 2111 was never reached. Furthermore, things went in the exact opposite direction. After a little hesitation, the bears finally took control and materialized the anticipated decline to the green line of support. But our premium clients do not receive just one-chart analysis. They get all the important time frames. In this case, the hourly chart above was also of great importance.
This smaller time-frame chart was valuable, because for the purposes of trading it is preferable to know what to expect in the short term as well. The explanation our clients received with this chart stated that the S&P 500 should “rise as high as 2100, where the 61.8% Fibonacci level is likely to put the bulls to rest and give the start of wave … down. This count remains valid, as long as the invalidation level at 2112 holds …targets in the area between 2060 and 2040.” So, the Elliott Wave principle not only provided a hint of the market’s most probable intentions, but also gave us a specific entry point, a stop-loss level and a target area. Let’s take a closer look at the hourly chart as it is today.
2112 was never reached. 2100 was and so was the area between 2060 and 2040. There are some problems with the so-called “Holy Grail”. First, it does not exist, and second, it turns out you do not need one. All you need is a method, which is accurate most of the time. A method, which allows you to know, when you are wrong. And a method, which tells you when to enter and when to exit the market. The Elliott Wave analysis combines all three. And charts is all it requires.
