S&P is Still Below Year 2000 Peak in Inflation-adjusted Terms

If we look at the inflation-adjusted S&P 500 ( S&P denominated by the Consumer Price Index), it indicates that if we disregard the inflationary decay in the domestic purchasing power of the U.S. Dollar from then until now, then the S&P has still not reached a new high since the year 2000.

In Elliott Wave terms, the price action of the U.S. equities markets since the peak in 2000 has been corrective. It is more clear to see in the inflation-adjusted equities charts. The present wave structure is most probably a "flat" (or perhaps an "expanded flat"). In either scenario, the price at this level would not be expected to exceed the peak of the previous wave (or at least not exceed it significantly) and the subsequent downturn (in wave C) should meet (or perhaps somewhat exceed) the extreme of the previous one (wave A).


The chart is clearly showing that A-B-C waves were complete, and we are in an all new grand cycle of wave 1 towards SPX2500s by 2017. Of course what will follow then would be an wave 2 down to below SPX2000, and goes back up in a big wave 3 along with the wage induced inflation.

I suggest you to read the chart beginning with 100+ year time frame on log scale.
Hi. I understand your point of view, and I might have the same outlook as you do if I judged it alone. I have been subscribing to the forecasts of Elliott Wave International for the past few months, though, and I tend to trust their assessment which is founded on the very long-term historical charts. They believe, at this point in time, the DJIA has been within Grand Supercycle Wave IV (circled) since the year 2000 peak and that the ultimate target is below 400. If so, these corrections naturally need to reach down much more deeply than they have so far since then.

That A-B-C decline is surely a completed zigzag (it has an internal 5-3-5 wave structure, and a total 3-wave structure). However, the following rally up to now from 2009 looks more like a long 3-wave ABC than a proper 5-wave impulse, in my view. Therefore, it leads me to believe that this will be followed by a 5-wave impulse, making altogether a more complex and larger (3-3-5) wave combination.
pwu831 AynCzubas
I have also subscribed EWI for one month back in 2012, and read they have been waiting for this "B" wave to play out. In fact I have heard that they have held that view since 2009. Well, if that's the case the market has more than double its prices since, and what kind of good their "analysis" would have offered?

As for the ABC like move since the bottom of 2009, my view is that we are in and near the end of the grand cycle wave 3. My analysis points to the end of wave 3 around 2250 level, likely to happen during this summer. I expect a wave 4 to last about six months into 2016 and to take us back to the 1900s levels. The five wave structure have not had a chance to evolve.
Well, to answer your first point about the so-labelled "B" wave rally from 2009: Granted, during this period the DJIA has come up from about 6,500 and the S&P from around 680. It's a massive increase in nominal price terms, though in inflation-adjusted terms the increases have not been quite as spectacular, as the Dow has exceeded the year 2000 peak while the S&P has not.

An important point to consider about the E.W. principle, though, is that an "expanded flat" correction always reaches a price extreme beyond that of the preceding impulse wave. That is to say, in this case, that if the year 2000 peak was the end of the preceding 5-wave advance, then the "B" wave of this expanded flat which has been unfolding since then is supposed to go higher than that 2000 peak, and the following "C" wave will go lower than where the "A" wave ended. The price distance that the wave has risen so far would not make it an invalid "B" wave within an expanded flat. The usefulness of their analysis would be in recognizing the rally from 2009 as still being in the middle of a larger multi-year downward correction rather than being the renewal of the longer-term upward trend.

Despite differing perspectives on the wave count, I think we both agree that markets will start correcting downward in a wave 4 this Summer ;-)
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