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How might the Australian Ord Index gives us clues as to the possible resolution of the S&P 500 Index?  It might do so by having a relatively clearer Elliott Wave pattern to view.  Let’s take a quick look at the Index and a possible Wave Interpretation.

$AORD Australian Ords Index (weekly):

We’ll start the count at the October 2007 highs which was the same time the S&P 500 Index peaked.

In both the S&P 500 and the Ords Index, Wave 1 was rather orderly, which broke down to a five-wave fractal in both indexes.

Wave 2 was also quick, forming an “ABC” Zig-Zag style pattern into the May 2008 highs.

Wave 3 is where things get a little “tricky.”  We see a steady fractal wave 1 down with a month-long fractal wave 2 correction.  Now, once the market began to fall in September, we had intense swings to the downside and a classic wave “iii of 3″ which tends to leap off the chart (and create new momentum lows as this did in October).

Fractal wave iv of 3 was quick and fractal v took us to new lows on a positive momentum divergence, completing the hideous Fractal Wave 3.

If this count is correct, then we’re in perhaps the latter stages of a fractal wave 4 correction and should be heading to new lows - or at a minimum a test of the November lows - as the Wave 5 plays out to the downside which would officially complete the “circled” large-scale Wave 3 and send us into a meaningful Corrective Rally soon.

Perhaps the pattern will be similar on the S&P 500 - in that we still have one more down-leg to go before rallying sharply into a large Wave 4 which could take us to S&P value 1,000 or 1,100… but we’re not there just yet.

The S&P 500 Index’s wave count recently has been tremendously difficult to count because of a complex correction and possible Elliott Triangle taking place.  Perhaps we can translate the relatively ’simplicity’ of the Australian Ords Index into a possible clue of what might be in store for the S&P 500.

And as a disclaimer, remember that Elliott Wave interpretation is only one of many analytical tools we can use to try to assess the next probable direction of the market.e.com