Elliott Wave Analysis of the S&P-500 by Sid from ElliottWavePredictions.com. Click on the chart twice to enlarge.

Developing wave counts during sloppy, overlapping price action is difficult, to say the least. This is why you see so many different Elliott Wave interpretations out there. Be that as it may, I’ve found that the correct count gradually reveals itself, even during the most volatile periods of market movement.

Let me start by stating that I have a high degree of confidence that the price action since the May 2 high is corrective, and will be followed by 5 waves up. After experimenting with a ridiculous permutation of wave counts, the attached chart shows what I find to be the most reasonable Elliott Wave interpretation of the S&P500 Index at this time. However, if price closes on a daily basis on the other side of that teal trend line, which extends from the March ’09 low through the July ’10 low, my confidence in this scenario will be highly damaged. Invalidation however, is way down at 1129.24.

Because I’m expecting a stock market rally to start quite soon, I think the recent change in my preferred Euro count makes a lot of sense, because it allows for possible new highs above the early May high sans invalidation.

By the way, the best alternate count in my opinion is the “triangle scenario”, which I lasted showed way back in a May 16 post.

P.S. Check out the possible divergence being formed by the MACD . .