In our update last week, we showed that the SP500 YTD responded quite well to the seasonality of the mid-term election year, thus suggesting a low around March 13 and a high around March 20. We utilize the word “approximately” because these dates are approximately ±3 trading days.
Fast forward to today: the index bottomed on March 13 at $6,632 and peaked on March 17 at $6,754. As of today, March 20, the index is reaching recent lows, its price is around $6,500. Therefore, the March 13 low was true while the March 17 high was within a +/-3 trading day margin of error.
Table 1: Year-to-date comparison between seasonality and actual market peaks and troughs
Therefore, it is quite hard to determine whether the March 20 maximum has been reached, which is why we give a yes and no verdict. Yes, because it is within the margin of error. No, because on any given day the index is below the March 13 low. But overall, the index has hit highs and lows based on mid-term election year seasonality 9 out of 13 times, probably 10 out of 13. It’s a reliable scorecard.
While of course past performance does not guarantee future performance, it does suggest that we should continue to expect the market to continue on this path in the future, but it appears that the March 31 low will occur sooner. As shown by the Elliott wave number in Figure 1 below and because the March 20 peak occurred on the 17thvol.
Figure 1. Medium-Term Elliott Wave Number for SPX from October 2025
As always, our focus is on what is most likely, not on what is possible. The index will soon reach the (black) 0.236 retracement of the rise from the April low, around 6492. There is also a gray 1.618x extension of Wi: 6493. This is a common target for the 5th wave on the final diagonal (ED), as we count the decline from the February 25 high (green Wb) as ED (green) Wc.
Since we are dealing with a fourth wave of a correction of a similar size to the 2022 decline – which was the second wave – and the corrections involve at least three waves, shown here as red Wa, b and c, it is unlikely that such a shallow retracement constitutes the entire correction. It’s possible, but unlikely. Additionally, as mentioned in previous updates, seasonality after the April 18 peak suggests a decline through the end of September before the next surge begins.
Therefore, we can make predictions based on available objective data
· This diagonal should be approximately $6490 ± $10 for red Wa black W-4.
· After the end of wave Wa, a counter-trend growth will begin, but it will only be wave B, which will peak on April 18 at around $6,900+/-100.
· This should trigger another decline (red Wc) at least until the enhance from the April low of at least 0.382 is abolished.
Since December, when we introduced this seasonality, the market has responded quite well. Therefore, going forward, we must assume that this will continue. However, we remain vigilant and, as always, we will monitor price action to detect any deviations: anticipate, observe and adjust as necessary.
