In our last update (see here), we showed that the S&P 500 YTD responded quite well to mid-term election-year seasonality, and combined with our Elliott wave principle work, we found that
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the [decline] should complete around $6490 ± 10
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A countertrend rally will start when the [decline] completes, …, topping out at around $6900+/-100…
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That should trigger another decline … to at least the 0.382 retracement of the rally from the April low.
Fast forward to today, the index bottomed on Friday at $6473, which is only 7 points below the ideal target zone. It has rallied about 2% since then. Since we are experiencing a fourth-wave correction similar in scope to the 2022 decline—which was a second wave—and corrections involve at least three waves (as shown in Figure 1 below as red Waves a, b, and c), it’s unlikely that such a shallow retracement will constitute the entire correction. It’s possible but unlikely. Therefore, the red Wave-a of the black W-4 has most likely bottomed.
Figure 1. Intermediate-term Elliott wave count for the SPX since April 2025.
Since we focus on what is most likely rather than what is merely possible, we apply a weight-of-the-evidence approach. While seasonality is one factor, we also evaluate several market breadth indicators. In this case, we examine the McClellan Oscillator for the S&P 500 and find that it recorded a higher low between the March 20 and March 13 price lows. See Figure 2 below. This suggests that fewer stocks participated in the recent decline. This is known as positive divergence (green dotted arrow) and is a bullish signal.
Additionally, the indicator had dropped to levels last seen during the April 2025 crash low. Therefore, market breadth was very oversold, like a rubber band stretched so far it needs to snap back, or it will break. Also, a bullish signal.
Figure 2. McClellan Oscillator for the SP500 since April 2025.
The second market breadth indicator we evaluate is the cumulative Advancing-Declining line for the SP500: the SPXA/D. See Figure 3 below. So far, it has maintained the blue-dotted uptrend line since the April lows (black up arrows). This is a bullish sign. Additionally, in early 2025, there was a negative divergence between the index and its A/D line, foreboding the February-April correction that year (solid red and green arrows). Recently, there was no such divergence; in fact, the A/D went up, while the index was flat at best (dotted red and green arrows in the black box). Meanwhile, the A/D line has now broken above its downtrend line in place since early March (green up arrow). Another bullish signal
Figure 2. Cumulative Advancing-Declining line for the SP500 since October 2025.
Therefore, although price remains the ultimate decider, key market breadth indicators are generally bullish. Meanwhile, the index has hit a bottom exactly at the level our Elliott Wave count and Fibonacci levels predicted. So, if it stays above Friday’s low, we expect the B-wave bounce to ideally $6900 ± $100 to continue; otherwise, the next support level is in the mid-6300s before the Bulls can start again.