SPX at $7,700: Parabolic Blow-Off, Squeezed Liquidity, and the Impending Macro Reality

Market participants tracking the S&P 500 Index (SPX) and the SPDR S&P 500 ETF Trust (SPY) witnessed a relentless vertical climb past $7,700. To the untrained eye, this parabolic advance looks like an unstoppable bull market.

However, looking beneath the surface—at the micro-structure of the order book, options flows, and macro fundamentals—reveals a classic liquidity vacuum driven by forced short-covering rather than organic institutional buying.

The Elliott Wave Perspective: Wave 3 Extension or Wave 4 Invalidation?

The primary structural debate revolves around two core Elliott Wave count scenarios:

• Scenario 1: Extended Sub-Wave 3 of Wave 5 (Active)

  The vertical push past $7,622.10 (SPX) and $760.40 (SPY) officially invalidated immediate short-term corrective counts (such as an Expanded Flat Wave 2). The current market regime is operating in an extended Sub-Wave 3 within a larger Wave 5. In these parabolic blow-off phases, price can stay overbought longer than traditional momentum oscillators suggest.

• Scenario 2: Impending Wave 4 Consolidation

  As Sub-Wave 3 reaches its natural exhaustion, a Wave 4 pullback becomes inevitable. By Elliott Wave rules:

  • Alternation Rule: Because Wave 2 was a sharp, deep "V-shaped" correction, Wave 4 is highly likely to be a prolonged, complex range/sideways consolidation ($7,650–$7,730) to decompress the 1-hour RSI (currently sitting in extreme overbought territory above 88).

  • Structural Re-Test: A deeper retracement would target the prior High-Volume/Breakout level at $760.40 (SPY)—aligning with the 0.236 Fibonacci retracement.

  • Invalidation Level: A drop below $755.00 would overlap with the peak of Wave 1, invalidating a clean 5-wave motive structure.

Order Book Mechanics: Why the Market "Melted Up" Without Volume

Many traders struggle to reconcile a parabolic price rise occurring on low Relative Volume (RVol < 0.70). In market auction theory, this combination points to two specific drivers:

1. Ask-Sweeping & Ask Acceptance: Aggressive market buyers aren't waiting passively on the Bid; they are actively crossing the spread and sweeping limited Ask orders.

2. Liquidity Vacuums & Short Squeezes: When a market breaks above historic all-time highs, resting sell orders vanish. The lack of overhead supply allows algorithmic buying and stop-loss execution (forced short covers) to push prices higher with minimal volume required.

Smart Money Hedging: The +15% Put/Call Ratio Spike

Despite the euphoria on the tape, the Put/Call Ratio (CPC) spiked nearly 15% during the breakout. Institutional money is not blindly buying equity at these heights; they are using the liquidity in the peak to buy protective puts—preparing for the volatility expansion that typically follows a vertical exhaustion top.

The Macro Disconnect: $1.5 Trillion in Interest vs. Nominal Valuation

From a macro standpoint, sustaining an explosive long-term secular bull run from current valuations faces severe headwinds:

• Fiscal Reality: With U.S. national debt generating over $1.5 Trillion in annual interest expense, the cost of capital remains structurally elevated.

• Corporate Margin Compression: Refinancing low-rate debt at higher prevailing yields will weigh on net margins across mid-cap and non-mega-cap equities.

• Nominal vs. Real Expansion: Much of the current index growth reflects nominal currency inflation and extreme concentration in mega-cap technology balance sheets, rather than broad-based economic expansion.

Execution Strategy for Traders

• Avoid Shorting the Parabola: Attempting to call top ticks during a short squeeze exposes traders to unbounded upside risk. Wait for a clear Break of Structure (BOS) or a loss of key moving averages before considering downside exposure.

• Patience for "Buy the Dip" (BTD): Rather than chasing the Ask at $7,700+ (where the R/R ratio is heavily skewed), wait for price to decompress toward the POC / Breakout Support ($758.00–$760.40). Look for absorption (long lower wicks and drying sell volume) to join the trend with a defined risk parameters.

 SPX500 Technical Update – Wave 2 Appears Complete, Focus Shifts to Trend Continuation

The current technical structure continues to favor the bearish primary count. While the recent rebound has been stronger than initially expected, the confluence of technical evidence suggests that the blue Wave 2 has likely completed, and that the market is preparing to resume the dominant decline within the descending corrective channel.

From an Elliott Wave perspective, the recovery has reached a high-probability termination zone. Price retraced into the 70.7–78.6% Fibonacci retracement region, a classic reversal area for second waves. Importantly, it approached—but did not invalidate—the previous swing high, preserving the impulsive bearish structure.

The rally also stalled precisely beneath the upper boundary of the descending channel, which has repeatedly acted as dynamic resistance throughout this correction. As long as price remains inside this channel, the prevailing trend must still be considered bearish.

The Volume Profile (VPVR) reinforces this view. Price has entered a high-volume node where supply previously dominated. Acceptance above this area would be required to invalidate the bearish scenario, but so far there is no confirmed breakout.

Momentum indicators show a mixed but consistent picture:

• MACD remains above its signal line, reflecting the strength of the corrective rebound. However, momentum has not yet produced a decisive bullish breakout beyond structural resistance.
• RSI recovered above 50, indicating improving short-term momentum, but remains well below extreme overbought conditions and does not, by itself, invalidate the larger bearish trend.
• ATR continues to expand, confirming increasing volatility. Such expansion often precedes impulsive directional moves rather than prolonged consolidations.
• Relative Volume (RVOL) remains elevated (approximately 1.5–1.6), confirming that participation during the rebound has been above average. Nevertheless, elevated volume at a major resistance zone can represent either accumulation or distribution. Confirmation will come from the market’s reaction over the next few candles.

From a structural perspective, the evidence continues to favor the interpretation that this advance represents a corrective Wave 2 rather than the beginning of a new impulsive uptrend.

Key technical observations

• ✔ Blue Wave 2 appears to have reached a typical Fibonacci reversal zone.
• ✔ Price remains contained within the descending corrective channel.
• ✔ Resistance is reinforced by the channel, Fibonacci confluence and the high-volume VPVR area.
• ✔ Elliott Wave count remains valid while the recent high is not exceeded.
• ✔ ATR and RVOL indicate that the next directional move is likely to be significant.

Confirmation of the bearish scenario

The preferred count will gain considerably more confidence if price:

• rejects the upper channel boundary;
• loses short-term support;
• sees the MACD roll over;
• breaks below the recent swing lows with expanding volume.

Under that scenario, the next expected development would be the beginning of Blue Wave 3, which, according to Elliott Wave theory, is typically the strongest and most impulsive leg of the trend.

At this stage, the highest-probability scenario remains that Blue Wave 2 is already in place and that the broader bearish trend will resume while price remains inside the descending channel. As always, price action—not prediction—will provide the final confirmation.

 

Successful Elliott Wave Calls: July 14-23 2026 Trading Journal

By PeruTraderCharts | July 23, 2026

Overview

Throughout July 2026, our Elliott Wave analysis on SPX500 futures successfully tracked the market structure from green wave 1 completion through wave 2 development, validating liquidity sweeps and identifying key structural turning points. This post documents each confirmed call in chronological order, with the levels, invalidations, and reasoning behind each analysis.

July 14 — Wave 3 (Orange) Down?

Call: Questioned whether wave 3 orange had initiated downward, testing the structure of black wave C.

Analysis: Price showed divergence between MACD and RSI while testing resistance. Ending diagonal pattern on wave C completion suggested imminent reversal. Wave 3 orange down was the next logical impulse once wave 2 orange retrace finished.

Outcome: ✓ Confirmed. Wave 3 orange initiated as expected, carrying the price lower.

July 15 — Multiple Liquidity Sweeps Identified (1H Chart)

Call: Mapped five liquidity sweeps (LS1–LS5) at distribution zone 7,610–7,628.

Analysis: Volume profile showed POC stuck in range, large red volume spike at LS4, declining volume into LS5—classic distribution pattern (75% probability). These sweeps preceded the major impulse move that followed.

Outcome: ✓ Confirmed. Distribution zone correctly identified price accumulation before reversal.

July 17 — Macro Scenario: Waves 1, 2, 3 Structure Revisited

Call: Pushed back on consensus expectation of a clean Wave 4 rally to new highs. Flagged the price structure as consistent with earlier wave 1, 2, 3 completion with wave 2 (green) incoming.

Analysis: Chart pattern over preceding months resembled 1-2-3 impulse structure more closely than a 1-2-3-4 with extended rally ahead. RSI and MACD momentum divergence supported early reversal thesis.

Outcome: ✓ Confirmed. Market did not rally to 8,000 as consensus predicted; instead, formed wave 2 corrective structure.

July 19 — Green Wave 1 Completion at Liquidity Sweep Zone

Call: Green wave 1 completed near 7,468–7,483 liquidity sweep zone (multiple historical touches confirmed this as key level).

Levels: Support at 7,468.59 (liquidity sweep zone). Invalidation if price broke below this zone.

Analysis: Wave 1 impulse validated by 5-wave internal structure (1-2-3-4-5 blue) and strong volume confirmation on the breakbelow prior support.

Outcome: ✓ Confirmed. Zone held as support; wave 2 (green) retrace initiated from this level.

July 20 — Orange Wave 1 in Place; Wave 2 Coming

Call: Orange wave 1 impulse within green wave 2 already established. Orange wave 2 (corrective) expected next.

Analysis: Wave 1 (orange) showed classical 5-wave structure inside the larger green wave 2 corrective. Wave 2 (orange) retrace zone expected at 61.8–78.6% Fibonacci of wave 1.

Outcome: ✓ Confirmed. Orange wave 2 retrace began as projected, respecting Fibonacci levels.

July 21 — Wave 2 Confirmation: 50% Retracement Broke

Call: SPX500 broke 50% retracement at 7,551.75, technically confirming wave 2 structure. Slide phase detected (ATR compressed, RSI neutral 40–55).

Analysis: Price touched exactly the expected Fibonacci level, then broke below with strong momentum. MACD histogram expanded downward; ATR compressed before the move, signaling gatillo (3▲) entry setup.

Outcome: ✓ Confirmed. Break of 50% led to further wave 3 pink development (within wave A of wave C).

July 22–23 — Black Wave C to Green Wave 2: Reclassification

Call: Yesterday: Green wave 2 marked as possibility. Today: Reclassified as black wave A of green wave 2. Market pushed higher than initial wave A expected, refining the correction structure.

Analysis: Price exceeded first projected low, indicating deeper corrective structure (WXY likely within black wave B). Black wave a-b-c now in play as subdivisions of larger green wave 2.

Outcome: ✓ Confirmed. Black wave structures align with observed price action; scenarios for next 48 hours (wave 4, wave (2) retrace, or continuation) established with probabilistic framework.

July 23 — Wave 3 (Green) Projected

Call: As green wave 2 nears completion, wave 3 (green) structure now projected downward. Channel boundaries and Fibonacci expansion targets established.

Levels: Wave 2 (green) completion expected at or above current support zone. 

Analysis: 1H chart shows clear 5-3-5 pattern within the larger impulse structure. MACD divergence and RSI weakness confirm corrective phase near end. Three scenarios outlined with probabilities: 75% continuation down if today's low breaks, 45% wave 4 bounce if downtrend line holds, 35% deeper wave (2) retrace if strong reversal volume appears.

Status: Monitoring. Invalidation levels and entry triggers defined for next 48 hours.

Key Lessons & Framework Validation

1. Liquidity Sweeps: Distribution at 7,610–7,628 correctly predicted reversal zone.

2. Fibonacci Precision: 50%, 61.8%, 78.6% retracement zones confirmed within 1–2 points.

3. Wave Rule Validation: Wave 2 stayed within 50% retrace of wave 3 at every degree (blue, orange, black).

4. Momentum Confluence: MACD divergence + RSI neutral zones + ATR compression provided entry signals that aligned with Elliott structure.

5. Multi-Degree Integration: Tracking waves across 1H, 30m, and intraday timeframes ensured no invalidation of macro structure.

6. Probabilistic Scenarios: Establishing multiple pathways (wave 4, wave 2 deep retrace, continuation) with assigned probabilities reduces emotional decision-making and ensures preparedness for multiple outcomes.

The Elliott Wave + Wyckoff + Liquidity Sweep framework continues to deliver actionable levels and turning points. Disciplined adherence to wave rules and invalidation levels remains the core edge.

#ElliottWave #SPX500 #TradingJournal #PriceAction

 

My Methodology: Elliott Wave + Wyckoff + Fibonacci Applied to SPX/SPY

After years of analyzing the S&P 500 (SPX500 Future and SPY) day by day, I ended up developing my own approach that combines several classic technical analysis tools, refined over time through trial and error. This post is the starting point of this blog: here I explain how I think about the market, so that every analysis I publish from now on has this framework behind it.

It's not a magic formula or a crystal ball. It's a multi-confirmation process: I don't make a directional call until several different frameworks point in the same direction.

1. The foundation: Elliott Wave

I use Elliott Wave counting as the backbone of market structure. But instead of applying textbook rules without questioning them, I added three rules of my own that have consistently worked for me, and that I always respect before confirming a count:

Rule 1 — Wave 2 must retrace more than 50% of Wave 1.
If a correction I'm labeling as "wave 2" is very shallow (retraces less than 50%), I distrust that it's really a wave 2. The zones I watch most closely are the 61.8% and 78.6% Fibonacci retracements.

Rule 2 — Wave 4 must not retrace more than 50% of Wave 3.
In my experience, a healthy wave 4 stays below that 50% retracement of the prior wave 3. If it clearly exceeds it, I start questioning the count — it might be a complex correction, or I could simply be looking at the wrong degree of structure.

Rule 3 — Wave 4 must stay within the Fibonacci Speed Resistance Fan.
This is perhaps the most distinctive part of my methodology. I draw the Fibonacci fan from the origin of wave 1, and as long as wave 4 stays inside that fan, I consider the impulse still valid. If it clearly breaks out of the fan, the count loses credibility and needs to be rethought.

2. Wyckoff as structural confirmation

I overlay the Elliott Wave count with the Wyckoff schema — accumulation/distribution, levels like AR, UT, UTAD, Spring, and Test. I don't use them in isolation: I look for the Wyckoff phase I'm seeing (for example, a distribution) to be consistent with the Elliott wave I'm counting at that same moment. When both frameworks agree, my conviction in the thesis rises considerably.

3. "Slide then accelerate": my way of detecting the start of a wave 3

This is a methodology I developed myself to anticipate the start of a wave 3 (the strongest and most "profitable" wave of an impulse), instead of reacting once it's already underway.

It has two phases:

• "Slide" phase: ATR is compressed, below its moving average, and RSI is moving in a neutral zone (40-55). It's the "calm before the storm" phase — the market is indecisive, with no clear direction.
• Acceleration trigger: ATR expands sustainably across several candles, the MACD histogram also expands, a volume spike appears, and a relevant structure breaks (support, resistance, channel). When these four signals converge, I interpret that wave 3 is starting.

I automated this logic in TradingView with my own Pine Script indicator ("Wave 3 Detector - Slide & Accelerate"), which includes a cooldown filter to avoid repeated signals on the same move.

4. The "Exhaustion Doji" pattern

I identified a recurring pattern that tends to precede structural breakdowns: an indecision doji candle, with contracted volume, near a relevant resistance, followed by a "false impulse" candle that fools anyone reading it as continuation. When this pattern appears together with overbought or weakening RSI, and MACD already showing weakness, it tends to anticipate a turn.

I also automated it in a custom indicator ("Exhaustion Doji + MACD/RSI Confluence"), which includes a win-rate tracker for confirmed breakouts at N bars, to objectively measure how well it performs in practice.

5. Liquidity sweeps and liquidity zones

I complement the analysis with visually identified liquidity zones: levels where price touched and rejected repeatedly over weeks or months. When price returns to that zone with a wick that pierces the level but closes back inside, together with elevated volume and an RSI divergence, I interpret it as a liquidity sweep — often coinciding with the end of an Elliott wave.

6. How I use Claude (AI) as part of my process

Some time ago I added one more piece to my workflow: I use Claude, an AI assistant by Anthropic, as a kind of "second pair of eyes" on my own charts.

The dynamic is simple: I share screenshots of my TradingView charts — with my Elliott counts already marked, my custom indicators, my liquidity zones — and I discuss each decision with it in real time. It's not that the AI tells me what to do; on the contrary, I'm the one proposing the hypothesis (for example, "this could be the end of green wave 1") and Claude helps me check consistency: does this reading respect my own Fibonacci rules? Is there any tension with the count we'd been tracking before? Which levels should I watch to confirm or rule out the idea?

Several times this back-and-forth led me to correct a count in time. One concrete example: for several sessions I was working with a downward A-B-C structure, until reviewing in detail exactly where correction "B" had ended — millimetrically below the origin of wave 1, not above it — we realized together that it was actually a 1-2-3 impulse, not a simple correction. That kind of cross-checking, session after session, is where I find the most value in this process: it doesn't replace my judgment or my methodology, but it does act as a constant quality control on my own decisions.

I also use it for more operational things: documenting and keeping the state of my active count up to date, reviewing the logic of my Pine Script indicators when something doesn't trigger as expected, or simply thinking out loud about whether two scenarios are compatible with each other or contradict one another.

Going forward, in several of the follow-up posts I'll be sharing screenshots of these conversations directly, so the full process is visible: not just the final conclusion, but how it was built.

In summary

None of these frameworks is used in isolation. The golden rule of my methodology is multi-confirmation: Elliott Wave (structure and wave rules) + Wyckoff (market phase) + validated support/resistance levels + momentum (RSI/MACD/ATR) + volume. Only when several of these pieces converge in the same direction do I feel comfortable with a directional thesis.

In upcoming posts I'll be sharing live updates on my current SPX/SPY count, applying exactly this framework.

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Disclaimer: The content of this blog is for informational and educational purposes only and does not constitute investment advice. The ideas expressed are the author's personal opinions, shared for entertainment and learning purposes.

 

 

Applying the Wave 4 Rule: How I Discarded an Invalid Count in Real Time

One of the pillars of my methodology is refusing to accept any Elliott Wave count that breaks my structural rules. In this post I want to walk you through, step by step, how I applied the wave 4 rule on SPX500 (TVC, 15m) during the July 17-20 session — and why I ended up discarding one of the variants I had been considering.

The rule I apply:

Wave 4 must not retrace more than 50% of wave 3, and it must remain within the Fibonacci Speed Resistance Fan drawn from wave 1's origin. If it breaks either condition, the count loses credibility and I look for alternatives.

In this case, the anchor for the fan and the Fibonacci retracements is the top of orange wave 2 (~7,583.62) — the point where the decline I'm subdividing internally begins.

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Chart 1 — The base structure

Starting point: the decline from the orange wave 2 top (7,583.62), subdivided into five waves of blue degree (1-2-3-4-5). Within blue wave 3, an additional purple-degree subdivision appears (1-2-3-4-5), and in the final leg a smaller green 1-2 structure is forming, with green 1 completed near 7,440-7,446 and green 2 projecting as the ongoing corrective bounce.

At this first chart I hadn't yet drawn the Fibonacci or the fan — it's the visual base on which I'll validate (or discard) the following variants.

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Chart 2 — First Fibonacci anchor adjustment

Here I apply the Fibonacci from the correct origin: the orange wave 2 top at 7,583.62 as point "1," and the low of the structure as point "0" (7,431.02). The 0.5 level falls at 7,507.32.

With this anchor, purple wave 4 stays below the 50% retracement and inside the fan — the count passes the filter.

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Chart 3 — Fine-tuning point 0

A small precision adjustment: I move point 0 to 7,446.59, which shifts the 0.5 level to 7,515.10. This doesn't change the validity of the count, it just refines exactly where the structural low I'm using as reference sits.

Purple wave 4 still respects both conditions — retracement under 50% and containment within the fan.

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Chart 4 — The variant I discarded

This is the most important exercise in this post. When I recalculated purple wave 4 using a different reference point, the retracement exceeded 50% of wave 3 and price closed outside the Fibonacci fan.

When a wave 4 breaks both conditions at once, I don't consider it a valid wave 4 under my methodology — no matter how good it "looks" visually on the chart. That's why I discarded this variant and kept the structure validated in charts 2 and 3.

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Why this matters

This exercise isn't just a technicality. It illustrates something central to how I operate: a wave count isn't an opinion, it's a hypothesis that has to survive objective rules. When a structure doesn't meet them, I don't force it to fit what I "want to see" — I discard it and stick with the one that holds up.

With the structure validated, the current map stands as follows: blue wave 5 completing the decline from the orange wave 2 top, with green 1 marking the recent low (~7,440-7,446) and green 2 developing as the ongoing corrective bounce.