Yesterday’s stock market outlook touched on a three potential Elliott Wave counts (Cases 1-3), and I mentioned:

For Elliott Wave, the S&P500 is clearly correcting, but what’s not so clear is whether it’s within an uptrend or the start of a downtrend. So the signal remains mixed.

At the moment, I think we’re still in the 5th Intermediate Wave…probably the 3 minor wave…more to come.

Thanks to today’s market action, I received quite a few emails asking:

1. For the “normal” Case 3 Elliott Wave chart
2. If Case 3 was still my preferred count after today’s sell-off

The answer in both cases is yes.  Even with today’s sell off, the Intermediate 5, Major 3 count is still valid.

SPX Price Chart for September 20, 2021

If we lay in the Fibonacci levels from the start of the current intermediate wave, we see:

• Today’s intraday low of 4305 was 2 points away from the 50% retracement level.
• Today’s close was ~2 points away from the 38% retracement level

The question now is whether tomorrow will be turnaround Tuesday or something else.  If the S&P500 continues to sell-off and head’s below 4257 (the high point for the current Major 1 wave), then the 5th wave scenarios (i.e. Case 1) are much more likely.

COMMENTARY

Today’s U.S. equity market action was ugly, thought the last 30 minutes took out some of the sting.

The narrative behind today’s sell-off was that traders fear spillover effects from the potential collapse of Chinese property developers, particularly a company called Evergrande.  Apparently, Evergrande has ~$300 billion in debt and two of those bills come due this Thursday ($83.5 million  and $36 million).

While they still have 30 days to pay, there’s growing concern they’ll default regardless.  This fear is causing pain for other Chinese property developers: Sinic and Guangzhou R&F saw massive sell-offs themselves.