Stock Markets Analysis and Opinion

Can S&P 500 Reach 5000+ After Bear Market? 

2022.06.17 21:06

You must think I am crazy even asking this question because prices are supposedly only going down in a bear market. But allow me to explain:

In my article about the Dow Jones Industrial Average posted yesterday, I showed the possibility that the index is already in a multi-year bear market.

The same applies to the S&P 500 (SPX), and the same crucial question is: how will this multi-year bear market unfold?

Namely, looking forward to and anticipating the next few months and years matters for traders and investors. Or, as they say, .

One of the best ways and tools to do that is by assessing the past and applying the Elliott Wave Principle (EWP). I will determine the SPX’s big-picture EWP count in this article using price data since the 1920s. Note that the S&P 500’s inception occurred in 1957, and it was the before that. I will apply the EWP’s rules, patterns, and past corrections to anticipate how this potential current bear market may unfold logically.

Can S&P 500 Reach 5000+ After Bear Market? S&P 500 Monthly Chart With Detailed EWP Count

If Super Cycle III topped, how could Super Cycle IV develop?

Before I try to answer that question, I need to establish the big-picture EWP count to help me determine SC-IV’s potential future progress. The infamous 1929 top and subsequent crash into the 1932 low are by most ellioticians regarded as Super Cycle-I and II, respectively. See figure 1 above. In more detail, SC-II was a zig-zag. The subsequent five waves rally into the 1937 high was the one degree lower Cycle-1 wave. C2 bottomed in 1942 and was also a zig-zag. (Blue) Primary-I topped in 1946 (yes, the market rallied >100% during World War II, as it already sniffed out Germany would lose, aka the Markets are forward-looking), and P-II was another zig-zag. We can see An impulsive advance into the 1968 high from that low. Then the index went through a six-year-long sideways consolidation. In EWP terms called an irregular, expanded flat wave (IV). Flat corrections consist of three waves: A-B-C. The internal structure of each wave is 3-3-5. In Bull markets, the B-wave of an irregular flat makes a new ATH.

From the EWP, we know that in an impulse, five comes after four, and the market embarked on P-V, which topped in 2000 to complete C3. Another almost decade-long sideways consolidation happened: Cycle 4. This wave was also an irregular expanded flat, with the 2007 ATH the B-wave top. Cycle-4 bottomed in March 2009, and since then, we have come to enjoy C5 of SC-III. The index went through two more flat 4th waves between then and now. The smaller one (2015-2016) was a regular flat, whereas the larger one (2018-2020) was -once again- an irregular expanded flat. The was the C-wave of that flat. The subsequent rally from the March 2020 low was Primary-V of Cycle-5 of Super Cycle-III. The latter may now have topped, meaning Super Cycle-IV is underway.

Given the in the EWP:

In this case, I established all the 2nd waves (SC-II, C-2, P-II) were simple zig-zags and all fourth waves (P-IV, C-4, M-4, P-IV) were complex flat corrections. Thus based on this pattern, it is logical to assume the current SC-IV wave will also be complex: a flat.

At this stage, one cannot know if SC-IV will become an irregular expanded flat, meaning wave-B of IV will make a new ATH or only a regular flat (A=B=C). However, based on the historical evidence, it will likely become irregular and expand flat. The B-wave can reach as high as SPX5000-5500 and satisfy my long-standing call for this price level.

.”

Besides, if SC-IV follows the prior 4th waves paths, I expect SC-IV to ideally bottom between $2420-1850. Based on the timeline of these previous 4th waves, I expect SC-IV to last potentially up to a decade.

In more detail, wave-A of SC-IV has then just gotten started, and the first leg lower (wave-a of A) should wrap up soon, to be followed by a multi-month relieve rally/dead cat bounce (wave-b of A) before the next leg lower starts (wave-c of A).

Once wave-A completes, wave-B can reach as high as SPX5000-5500, as shown in the above chart, but it will take much longer than originally anticipated.

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