2025-06-20 20:01:00
SPX rally Stalls: Is a Pullback on the Horizon?
The S&P 500‘s recent performance suggests a potential pause in its upward trajectory, hinting at a possible short-term dip before a more significant rally.
- The S&P 500 (SPX) has stalled after reaching a recent high.
- Seasonality patterns, particularly those tied to post-election years, are playing a role.
- Analysts anticipate a short-term pullback followed by a multi-month rally.
The S&P 500 index, after a promising run, has shown signs of topping out, potentially aligning with post-election year trends that began in 1928.
In a previous analysis, the SPX was predicted to reach $6,125 ± 25, $6,000 ± 25, and $6,150-$6,200. This was based on a standard Fibonacci Elliott Wave (EW) Principle approach. Adjustments were made on June 6, leading to revised targets like W-iii: 6025-6060, W-iv, 5960+/-20, and W-v, 6125-50. The index hit $6059 on June 11, found support at $5963, and then stalled at $6051.
Did you know?–Elliott Wave Principle, developed by Ralph Nelson Elliott, suggests that market prices move in specific patterns called waves.Thes patterns are used to forecast future price movements.
The index has since plateaued, essentially returning to mid-May price levels. This may signal a larger top, potentially a gray W-iii/c, as indicated by post-election year seasonality data.
Figure 1. Post-election year seasonality vs. our preferred short-term Elliott Wave count.
Historically, the U.S. presidency’s post-election years have shown a pattern that the index appears to be following in 2025, as shown by the blue arrows. There are minor timing differences, such as the late-February low versus the mid-March low (green W-a) and the absence of a late-April low (grey W-ii), but the overall trend remains consistent.
Reader question:-How do you incorporate economic news and events into your elliott Wave analysis? Does fundamental analysis play a role in validating or invalidating wave counts?
Seasonality forecasts pointed to a high between June 8 and June 12 and a low between June 16 and June 22,marked by red circles in figure 1. The index peaked on June 11, hit a low on June 13, and has since reverted. Thus, a near-term low is expected, succeeded by a 4- to 6-week rally.
This anticipated rally is expected to complete the green W-1/a, followed by a multi-month pullback (green W-2/b) to SPX5400-5600. after this, the index is projected to climb to $6700-7100, as the 2020 rally is not yet complete. This aligns with the broader EW count.
Figure 2. The SPX weekly chart with our preferred EW count.
Deep Dive into Elliott Wave and Fundamental Analysis
The recent stall in the S&P 500’s (SPX) upward movement, as discussed, prompts a deeper look at how technical analysis, like the Elliott Wave Principle (EWP), interacts wiht economic fundamentals. Remember the reader’s question: “How do you incorporate economic news and events into your Elliott Wave analysis? Does fundamental analysis play a role in validating or invalidating wave counts?”
in short,analyzing the economic factors that influence the movement of the market is critical. Both technical and fundamental analysis,working in tandem,can enhance our understanding and provide a more comprehensive forecast.
The Role of Fundamental Analysis
Fundamental analysis involves evaluating a company’s or market’s intrinsic value by examining economic and financial factors. This approach considers various elements:
- Economic Indicators: Data points like GDP growth, inflation rates, and unemployment figures provide insights into the overall economic health.
- Monetary Policy: Decisions made by central banks, such as interest rate adjustments, significantly impact market sentiment and asset prices.
- Geopolitical Events: Global events, trade disputes, or political instability can create market volatility and influence the direction of specific sectors.
- Company-Specific Factors: For individual stocks, examining revenue, earnings, debt levels, and industry trends is crucial.
fundamental analysis aids in validating or challenging the wave counts derived from Elliott Wave analysis. As a notable example, if a particular wave count suggests a bullish trend, examining economic data will help ascertain if the underlying economy supports that outlook.
Integrating Economic News with EWP
Here’s how to integrate economic news and events into an Elliott Wave analysis:
- Stay Informed: Continuously track economic data releases and monetary policy announcements. Keep abreast of prevailing news to anticipate potential market reactions.
- Calendar and Event Correlation: Create a timeline correlating EWP predictions to upcoming economic events. This allows you to assess market reaction in real time, validating or invalidating wave counts.
- Analyze Earnings Reports: Assess how the earnings performance of leading economic indicators influences the market. This helps in refining the broader EW outlook, with a specific focus on the prevailing wave count.
- Monitor Risk Appetite: Changes in risk appetite affect the market’s reaction to economic events.
Consider the impact of the Federal Reserve’s interest rate decisions: if a wave count predicts a bullish rally, and the Fed signals accommodative monetary policy, this strengthens the bullish case. Conversely, if the economic data points to a potential recession, and the wave count suggests a bullish trend, it may be prudent to adjust your expectations or reassess the wave count.
How does fundamental analysis validate Elliott Wave patterns? fundamental analysis helps confirm the internal logic of an Elliott Wave interpretation.If economic data supports the wave’s projected direction, it increases confidence in the analysis.
Is it possible for fundamental events to invalidate a particular wave count? absolutely. Major economic shocks or unexpected shifts in monetary policy can disrupt the expected wave patterns. Thus, it is indeed necessary to have contingency plans and be able to adjust to changing conditions.
Frequently Asked Questions
Can fundamental analysis predict market tops and bottoms?
Fundamental analysis can help you identify overvalued or undervalued assets. However, it doesn’t provide precise timing for market tops and bottoms. This is where the Elliott wave model can be combined with fundamental analysis to create a better forecast.
How often shoudl I reassess my EW analysis?
Reassess your Elliott Wave analysis regularly, especially after major economic announcements. Evaluate the market’s response and adjust your wave counts, targeting SPX levels as necessary.
What economic indicators are most impactful for the market?
pay close attention to GDP growth, inflation rates, employment figures, consumer confidence, and the Federal Reserve’s interest rate and monetary policy decisions. These are key indicators for assessing market health.
Can geopolitical events disrupt EW patterns?
Yes, geopolitical events can create market volatility and disrupt established Elliott Wave patterns. Always factor in global and political events into your analysis.
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