S&P 500 waves (1W) since 1994 - Will correction take us to 2000?

See chart for details. There is no such thing as a V shaped recover. Corrections always have a drop, up, and a second drop. It is all a matter of timescale.

I find it very useful to identify waves using a support trend line. A corrective wave always breaks the trend line. It just depend on what time scale you are looking at.

הערה:

I am not sure why anyone is getting wound up over this basic chart. You do realize that the market was trading around 2000 level just a little over 3 years ago. Its not like I hypothesized that the market could go back to 1994 levels. Sure, the time frame could be off, but considering the speed of the down and up, it does not seem unrealistic to drop to 2000 in a year. It dropped 1100 points in 2 weeks in March.

The chart is just basic wave analysis and TA ignoring all else. You are free to interpret it as you want. What I see is a MACD at the 2nd highest level since 1994. When it was that high in 2018 it kicked off a year long correction that end up with a 600 point loss (twice). The only other time it was higher was March and we all know what happened. The current stage of the market has all of the traits of a corrective wave B not a new motive wave. What follows is a wave C. It clearly is not a zig zag like many feared in March. The current wave B has not broken the ATH, so it is not going to be a running flat (if all things stay the same). You are left with a regular flat that will most likely end around March low or an expanded flat that goes noticeable lower than March (what I drew).

If you saw this TA on any other equity across any timeframe, you would totally believe it. Why is it so far fetched that it can't happen to the S&P now? Not sure if you have noticed this, but the US saw a 30% drop in GDP and the expectation that it will take 1-2 years (at best) to get back on track. Oh yeah, COVID is not going away anytime soon. We are possibly starting a "cold war" with China and the current president seems to be doing everything in his power to delegitimize the upcoming election. In any other time in history just one of those things would have cratered the market for months or years.

I know, I know, this time it is different. The Fed has got our back. Maybe, maybe not. The chart is not trading advice. Relax.

Sorry for the soap box :) Hope it helps and good luck.

FYI, the trick I learned with the support line really does work well to identify motive waves and corrections. Using the RSI and divergence indicator can also help a lot.