S&P500: How to Know the Trend at a Glance | Elliott Wave International

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S&P500: How to Know the Trend at a Glance
An example of how Elliott wave analysis helps you cut through the guesswork

By Vadim Pokhlebkin
Thu, 10 May 2012 17:00:00 ET

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When you trade stocks, the question is always the same: What's the trend?

Looking at the market's "fundamentals" today, you'd probably agree that it's a tough call. Europe is tanking, but maybe it's not so bad; U.S. jobs market is improving, but not as well as we'd like. Is the Fed done "stimulating"? Will the ECB lower interest rates? And on, and on.

Here's how Elliott wave analysis helps you cut through the guesswork. In Elliott, there are only two types of wave patterns: impulsive and corrective:

Impulses have 5 non-overlapping waves and point in the direction of the trend.
Corrections usually have 3 choppy, overlapping waves and provide "pauses" for the trend.

Armed with this knowledge, take a look at this 15-minute S&P 500 chart. It's copied from our U.S. Intraday Stocks Specialty Service. You see it here without Elliott wave labels -- those you can see inside the Service. But even without the wave labels, what do you see?

From the top left-hand corner, you see 5 non-overlapping waves down, and in the lower right, you see a sideways consolidation. Right? Congratulations, you've just performed your own basic Elliott wave analysis of an S&P 500 chart. You now know that, at least on this 15-minute time frame, the trend, as indicated by the 5-wave impulse, probably remains down.

How far, how fast? Subscribe to our U.S. Intraday Stocks Specialty Service now, and get instant access to the latest forecasts for the S&P 500, DJIA and NASDAQ.

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Tags: Dow Jones Industrial Average (DJIA), Elliott wave, Elliott Wave trading, Interest Rates, Nasdaq Composite, S&P 500, stock indexes, technical analysis, trade targets, trading lessons, trendlines

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