Crucial $SPX $SPY $UPRO Elliott Wave Update — We got an entire C wave in one shot!
### $SPX $UPRO $SPY Crucial Elliott Wave Update — August 2, 2024
The S&P 500’s recent price action has been dramatic and indicative of a significant Elliott Wave pattern playing out. The downtrend has followed a classic zigzag formation, culminating in an extraordinary move that has likely completed the entire corrective wave in one shot. Here’s a detailed analysis of the recent movements and what they signify for the market’s future.
#### Zigzag Formation Breakdown
In Elliott Wave terms, a zigzag correction consists of three waves: A, B, and C. This pattern is characterized by a sharp decline (Wave A), a partial retracement (Wave B), and another decline (Wave C). The S&P 500 has followed this pattern with precision.
- **Wave A:** The initial decline took the S&P from 5670 to 5390, a 280-point drop that set the stage for the correction.
- **Wave B:** This was followed by a fierce reversal, pushing the index back up to 5565. This wave often traps bulls into thinking the correction is over.
- **Wave C:** The most recent and most significant move. In a textbook example of symmetry, the S&P saw a massive fade and a huge gap down, completing the C wave. From the top of Wave B at 5565, another 280-point decline brings us to the target of 5290. The actual low hit was 5300, indicating that we completed the entire zigzag correction in one dramatic move.
#### Implications of the VIX Spike
The Volatility Index (VIX), often referred to as the “fear gauge,” spiked to 29.66 yesterday. Such a high level indicates extreme fear and panic among investors, which historically corresponds with market bottoms. The VIX spike suggests that the selling pressure was intense, but it also implies that the worst might be behind us.
#### Potential for a Reversal
The gap down hammer pattern observed suggests a potential reversal. In technical analysis, a hammer pattern forms when a security trades significantly lower than its opening, but rallies to close near its opening price. This pattern often indicates that a stock is nearing a bottom. If this pattern holds, Monday could see a big white candle, signifying a strong reversal.
#### Possible Scenarios
1. **Immediate Reversal:** If the market opens strong on Monday, we could see a significant reversal, leading to a new bullish trend. This scenario aligns with the completion of the zigzag pattern and the extreme VIX reading.
2. **Slow Dribble Down:** Another possibility is a slow, dribbly move forming an ending diagonal down to the 5250–5290 range. This would still be within the bounds of a typical corrective pattern and could precede a more gradual recovery.
#### Impact on $UPRO and $SPY
Both $UPRO and $SPY, as leveraged and non-leveraged S&P 500 ETFs respectively, will mirror these movements. The completion of the zigzag pattern and the potential for a reversal would likely result in significant upside moves for these instruments. Investors in these ETFs should be prepared for volatility but also for potential gains if the market does indeed find a bottom here.
### Conclusion
The S&P 500 has likely completed a significant Elliott Wave zigzag correction with the recent dramatic movements. The precise fulfillment of the A = C pattern suggests that the corrective phase might be over, and the VIX spike indicates that fear reached its peak. A strong reversal on Monday would confirm this, potentially leading to a new bullish phase. Investors should keep a close eye on the market open and be prepared for either a sharp rebound or a gradual bottoming process.
