Chart of the Day - Monday, January 31st, 2022

Today’s Chart of the Day comes from by Ari Wald of Oppenheimer (@AriWald). It's a weekly bar chart of the S&P 500 over the past two years. The S&P 500 fell 5.26% in January, marking its worst month since March 2020. To be fair, the index has pretty much doubled since then with little interruption, so a corrective period could be viewed as healthy in the long run. Ari uses Elliot Wave theory to show that this appears to be the start of a three-wave correction that could last through the first half of the year. According to Elliot Wave theory, corrective phases are made up of three distinct waves - A, B, and C. January's price action formed what looks like the initial A-Wave. We could be in the midst of the B-wave now, which is a deceptive sucker rally. The C-wave that follows is the final washout of the corrective phase, which we could see in the coming months. On a brighter note, Ari points out that another leg lower "should create the secular bull market's next big opportunity."