- S&P 500’s 9% correction signals a critical juncture where the market could either rally again or enter a new bear phase.
- The next support zone between 4,100 and 4,600 is crucial for bulls to maintain hopes of a final blow-off top before a potential long-term correction.
- The market’s current retracement mirrors previous cycle-ending behavior, with key support levels determining the next phase.
There are worries that a more correction is in progress after the S&P 500 recently fell below a crucial support level. A more extensive market retracement may be about to start, based on long-term Elliott Wave analysis. The index has already corrected more than 9%, closing at 5,074.09, from its peak of close to 6,600 in early 2024.
This correction follows a powerful impulsive rally that completed wave (V) of a broader market cycle. Consequently, the market now enters a critical phase where either a final parabolic advance continues, or a new bear cycle begins.
The wave structure since 2009 shows a clean and completed five-wave impulsive sequence. Each major wave aligned with structural corrections, including triangles and wedges, reinforcing the technical accuracy of this cycle. Moreover, the last two corrections—35% in 2020 and 28% in 2022—were followed by fresh all-time highs. The current decline, about 17% from the top, fits within previous intra-cycle corrections. However, further downside risks remain if critical support levels do not hold.
Key Support Zone Between 4,100 and 4,600
The next major demand zone lies between 4,100 and 4,600. This range served as a strong support base before the final wave (V) surge. Additionally, this zone aligns with historical consolidation levels and previously marked the launchpad for new highs. Hence, holding this area is essential for bulls expecting a final blow-off top. Losing it would likely confirm that the market has already topped for the next five years.
Besides, rapid and deep pullbacks are common during the final stages of parabolic advances. These corrections tend to shake out weak hands before pushing higher. If the S&P holds within this demand zone, another vertical rally could occur. However, any breakdown below 4,100 may shift momentum firmly in favor of a long-term correction.
The current price action reflects behavior seen in past cycle endings. The 2000–2009 correction marked the last major retracement of this scale. Likewise, the recent decline mimics past post-wave-V moves. Moreover, the wave count strongly suggests a cycle shift may be near.
