S&P 500: Ending Diagonal (Rising Wedge) Pattern

FX:SPX500   S&P500指数
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 .


Since the index exceeded the March 23rd high, I have ruled out the idea that the wave 4 was developing as a triangle. It was an unorthodox view anyway, as ED waves should technically always develop as three-wave structures. I was just reaching for some clue as to the minimum height of wave 5 and thought perhaps it could be interpreted as a triangle -- until it broke the upper boundary.

Right now, my opinion is that a structure that we could call a wave 5 has developed within the ED, arguably in three waves, and it has met the minimum expected criterion of exceeding the wave 3. We are seeing more pronounced downside movement thereafter. Even if wave 5 develops as a more complex three-wave structure and reaches upward again, I do not expect the S&P to go higher than about 2183 before a significant correction occurs.
Looking at the developing price action, I keep seeing smaller wave structures which could be read as bullish triangles and which all seem to imply a tight range for an upper thrust of between 2143-2155, as though reconfirming and/or recalibrating the final target. Is it just me?
Great chart and explanation. Thanks. I think we likely have a similar pattern, perhaps completed with IWM. I have always had some trouble prospectively with this pattern over the years. With all the a-b-c ups sometimes each a and c of a,b,c is also an a-b-c pattern. Then just when I think it is over there is another wave up.
AynCzubas goodguy
Right, simple corrective patterns may develop into more complex ones unexpectedly.
Does look like it´s making an ED. Putting the ES on a log chart, it almost looks like the ES from 2009 lows has made one?

The possible ED has to date followed the pattern quite well.
Hi elpuerto,

We have the same idea about the recent action being an ED, and the time-cycle for the peaks since 2000 too. As for the rise from 2009 though, I'm inclined to look at the whole thing as a "B" wave with an ABC structure, with its internal "C" wave unfolding as a 5-wave impulse, the 5th wave of which (at least) might be an ED.
+1 返信
elp AynCzubas
I have another count what would make this a top of a w5 ED of a W3 with W5 still to come. Only time will tell if this is true? Could be 100% wrong!

This could be the internals of how this ED could be counted?

This is long term chart of the S&P Composite. Looking at it makes me ponder if there is a little more upside into the end of President Obama's second term. From all time lows to 1929 highs = 52 years. Take 52 years and multiply it by 1.618 = 84.1 Add 84.1 to year 1932.6 months low = year 2016.7 months. We look at price, but time has fib relationships too. Next would come a huge correction 1000 or less, maybe even at the bottom of the channel to the 500's - 600's??? If this count is correct, it could offer a generational buy and hold, similar to 1932 lows. However ot's all just speculation and most likely I am 100% wrong.
Hi elpuerto,

I view the whole rise from the 2009 low as a corrective wave, and here is why:

Given that the long-term rise to the 2000 peak was impulsive....

Following that there was the crash down into the low of 2002, followed by the bull run up to the next peak in 2007, then the crash down into the 2009 low. I see that three-wave down-up-down sequence as a single "A" wave in total.

Following that, since 2009 we have seen the rise to the present all-time high (Actually though, if we adjust for inflation, it is now only at about the same level as the peak in 2000 (which then looks like a flat correction)). So, I see the present rise as the "B" wave. An "A" wave may be 3 or 5 waves, but a "B" wave can only be a 3-wave structure. And this rise since 2009 has that marked segmentation between 2010 and 2011 which looks likes an intermittent "B" wave and lends to the appearance of the whole rise from 2009 being a "B" wave. The final "C" segment of that "B" wave must be impulsive, and I think we are in the terminal stage of it now with the ED. After the ED terminates, I am expecting a "C" wave down of the same degree as the decline from 2000 and the rise from 2009.
got little different count, first i had same spx w2 2010-2012 as you, then revised it
seems to me ew1-3/ew2-4 channels are fitted now correct
your take to that?
look4edge look4edge
anyway, in both counts w4 should target 1900/1880 area, either flat w4 started already or waiting w5 EDT alternative to be finished
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