Monday, January 31, 2011

S&P 500 ~ Elliott Wave Outlook on February 2011

Review of January:

I didn't write a separate post on January but instead I posted an outlook on 2011 in which I included the January outlook. I expected the market to hit the 1290 to 1300 area sometime in January to form an intermediate term top there. So far, it looks promising but I'm still missing a confirmation that the top is in.

Outlook on February:

We got a big down day on Friday but so far no real damage has been done to the bulls. I'd like to see a decline below 1271 and 1260ish first before removing the tentative wave (1) labeling.

The bears get big support from the April 2010 fractal which has been spot on the last few days:

If the correlation continues we should see another up day tomorrow to form the right shoulder and then the market should go downhill from there. Should the fractal play out the target for f6 is 1189.31 (and 1148.92 for f10) which coincidentally is right in my preferred target range for wave (2) (1200 +/- 25).

As mentioned in earlier posts my preferred target range for wave (2) is 1200 +/- 25. In this area there is:

- the weekly MA 76 (in a few weeks time) which provided support during the 03-07 bull market
- the weekly MA 200
- the 38 % retracement
- 1189 (fractal f6 target, see above)
- 1210 (2009 fractal target, see this post)
- the April and November 2010 top
- the wave 4 of (1) territory

I also tried to define a time target for wave (2). In 2009 the correction following the big rally retraced about 28 %. Applied to today a 28 % time correction is in late March. Applying the April fractal to today points also to a low in late March. So late March looks like a potential time target for wave (2).

To sum up, it looks like the market will correct in February. I need a confirmation first though, i.e. a decline below 1271/60. Once these levels are broken we should see 1200ish in a few weeks time.