SPX 60m 4-2-13

HYG daily 4-2-13

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

Ending diagonals are tricky to count in realtime, and if they continue to chop to new extremes, different diagonal interpretations can emerge. With the S&P moving to new highs this morning, there is now a way to count the upward chop from the March 19 low (1538.57) as a contracting ending diagonal, as shown on the S&P chart above. If this interpretation is correct, wave 5 green will form an orange abc zigzag, and cannot end above 1582.88. Wave 5’s of contracting diagonals most often “throw-over” a line extending from the extremes of wave 1 and 3, which has already taken place.

If the S&P continues unabated beyond 1582.88, this is not a diagonal, and an extended wave 5 pink would be underway, having begun with bullish nested 1-2’s. I find that unlikely though, because junk bonds gapped down to start the week, breaking below a trendline that has held since November. Junk bonds appear now to be attempting to fill that gap, and having nearly done so, should be followed by a wave 3 down. This would likely kick off a move lower in equities.

Sid