S&P 500 to 490 in expanded flat C wave? My "other" Elliott Wave count for equities markets

Professional Elliott Wave analysts are describing wave counts such as the bear-market rally being a "B" wave up before rolling over to go much lower in a "C" wave down,* or being in a relatively stage of a large impulse wave down. There do seem to be some referring to it being all or part of a 4th wave before a 5th wave down to new lows, but it isn't necessarily evident what they think such a 5-wave movement down would complete. I'd like to present once again, my idea for an alternative Elliott Wave count I started marking on my monthly chart about half a year ago. The markets have not (yet, anyway) moved in a manner that would negate this count. This would be an "expanded flat" with targets ranging from 468 to 491 to 554. I've marked those annotations onto my chart (below). I don't know that other Elliotticians have identified or put forward this idea for the equities markets; hence my statement that it's my "other" EW count.

You may notice that I've only marked "A", "B" and comments about a "C" wave target. This is because I see this as a large fourth-wave "expanded flat" (in Elliott Wave terminology) but don't necessarily want to get sidetracked into issues about what "level" of a fourth wave it represents. These movements are large enough that, if my view proves correct, it will be important to start getting bullish at the bottom of the "C" wave. Based on typical Fibonacci extension levels for an expanded flat, the primary objective would point to approximately 491 in the SPX, with alternative objectives at approximately 554 and 468.

Interestingly from an Elliottician's standpoint, this also points to the consolidation levels of 1994, which might be viewed as an prior, smaller-level 4th wave level typical for a pullback of this scope. Because it was noticeable consolidation in the yearly charts, it also is a classic chart support level that would be an area to focus.

My read of the technical indicators is that they can support this view, given that they are improving but not yet in position to confirm that "the low" has already been seen. Also, I do recognize that a complex correction can result in a "C" wave low as I've indicated, leading to more consolidation action (rather than a large fifth wave moving the markets to new all-time highs). But even the rally in a complex correction from a completed expanded flat would be much more robust than we've seen to date. So even though this idea may look bearish now, it could have relatively bullish implications later.

How bullish? If the expanded flat constituted an even larger (A) or (W) wave, then the (B) or (X) wave pullback upward could retrace perhaps 50% to 1033 (or if the flat reaches a relatively shallow level about 554, then a 50% retrace would focus about 1060). That may not sound like such a huge achievement now, but from a low such as 491 or 554 it would be a great buying opportunity. Of course, the next step down after that would be to much lower levels so remaining alert to the wave structure and technical indicators would be very important.

I'll be the first to abandon this point of view if the market charts prove it wrong. But until then, I'll continue to track this hypothetical. The timing for a "C" wave low like this will depend on when the "C" wave's internal 4th is complete - one of the reasons why I've kept a focus on whether the market may have recently completed it with the highs already reached this May.

For timing of a "C" wave low on this chart, I like the idea of a Fibonacci time extension measuring from the high-to-high and the low-to-high ranges incorporating the 2000 peak and the "A" and "B" wave points. Using the 1.382 time extension, and if my time calculations are correct, I believe the probabilities point to either September 2009, or June 2010.

*This A down from October 2007 to the March lows, B up for the current bear-market rally, and C down view is the one ably presented by Tony Caldaro with his Objective Elliott Wave (site listed at right). My default label here for Elliott Wave refers to Tony and his OEW, but my idea for the expanded flat isn't one that he addresses, presents, or uses in his counts.