The target for upwards movement for Monday was 2,097.

Price moved higher, as expected, to reach 3.67 points above the target.

Summary: The downwards trend should resume this week, most likely tomorrow. The target for a third wave down is at 1,982.

To see a weekly chart and how to draw trend lines go here.

Changes to last analysis are bold.

MAIN ELLIOTT WAVE COUNT

Click chart to enlarge.

It is possible that the S&P has seen a primary degree (or for the bear count below a Super Cycle degree) trend change.

This wave count now has some confirmation at the daily chart level with a close more than 3% of market value below the long held bull market trend line.

Further confirmation would come with:

1. A new low below 2,022.07 to invalidate the alternate wave count.

2. A clear five down on the hourly chart.

3. A clear five down on the daily chart.

4. A new low below 1,820.66.

As each condition is met the probability of a substantial trend change would increase.

Primary wave 4 would most likely be a time consuming flat, triangle or combination in order to exhibit structural alternation with the zigzag of primary wave 2. Primary wave 2 lasted 12 weeks. Primary wave 4 is likely to be longer in duration because combinations and triangles particularly are more time consuming than zigzags which tend to be quick corrections. Primary wave 4 may be expected to last more than 12 weeks, and may end with a total Fibonacci 21 weeks.

At this stage, a trend change is looking somewhat likely so I’ll list points in its favour:

1. ADX is above 20 and rising, and the -DX line is above the +DX line indicating a new downwards trend.

2. The long held bull market trend line, the strongest piece of technical analysis on ALL charts, has been breached now by a close more than 3% of market value.

3. There is quadruple negative divergence between price and MACD on the weekly chart.

4. There is double negative divergence between price and MACD on the daily chart.

5. There is persistent and strong negative divergence between price and RSI on the monthly chart. The last time this happened was October 2007 and we all know what happened after that…

6. A long held bull trend line on On Balance Volume going back to October 2014 has been breached and is no longer providing support (orange line added to OBV on the TA chart below).

7. DJT has recently failed to confirm the continuation of a bull market. This does not indicate a bear market, but does indicate caution.

Click chart to enlarge.

Upwards movement is back into minute wave i price territory invalidating the idea that it may be minute wave iv.

Minute wave iii is incomplete and may only subdivide as a simple impulse.

Within minute wave iii, minuette wave (i) is an impulse and minuette wave (ii) may now be a completed expanded flat correction. Within minuette wave (ii), subminuette wave b is a contracting triangle and a 119% correction of submineutte wave a, and subminuette wave c is 3.36 points longer than 1.618 the length of subminuette wave a.

There is not enough downwards movement at the end of Monday’s session to eliminate the possibility that subminuette wave c may yet continue higher. In the first instance, before I would be confident that the downwards trend has resumed, I would want to see the small narrow channel about subminuette wave c breached clearly with downwards movement. Thereafter, a new low below 2,093 would provide some further confidence.

At 1,982 minuette wave (iii) would reach 1.618 the length of minuette wave (i). If minuette wave (ii) moves any higher tomorrow, then this target must also move correspondingly higher.

Minuette wave (ii) may not move beyond the start of minuette wave (i) above 2,129.87.

ALTERNATE ELLIOTT WAVE COUNT

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The ending contracting diagonal may still be incomplete. Ending diagonals require all sub waves to subdivide as zigzags, and the fourth wave should overlap first wave price territory. It is Elliott wave convention to always draw the diagonal trend lines to indicate a diagonal structure is expected.

The diagonal trend lines are no longer clearly contracting and minuette wave (c) within minute wave iv now looks like a three where it should be a five. This reduces the probability of this wave count.

If it moves any lower, then minute wave iv may not be longer than equality in length with minute wave ii at 2,022.07. If it is over here, then minute wave v up also has a limit and may not be longer than equality with minute wave iii at 2,197.84.

The best way to see where and when upwards movement may end is the upper diagonal i-iii trend line. It is very likely to be overshot. Upwards movement may find resistance at the long held bull market trend line.

Because the long held bull market trend line has now been breached by a close more than 3% of market value below it, this wave count is now an alternate and a bear market is indicated.

Click chart to enlarge.

Minute wave v may have begun with either minuette waves (a) and (b) complete, or only subminuette waves i and ii within minuette wave (a) complete. The degree of labelling within minute wave v may be correct here, or it could also be moved down one degree.

At this stage, if minuette waves (a) and (b) are complete, then at 2,148 minuette wave (c) would reach 2.618 the length of minuette wave (a).

I don’t have a lot of confidence in this target. When there is more structure upwards to analyse then the target may change, but it does not expect a reasonable overshoot of the i-iii diagonal trend line.

At this stage, I also don’t have confidence in this alternate wave count: the diagonal is not looking right at the daily chart level, ADX continues to indicate a downwards trend is in place, and volume continues to favour a bear market.

The upwards wave labelled subminuette wave i subdivides strongly as a three on the five minute chart, but it should be a five.

BEAR ELLIOTT WAVE COUNT

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The subdivisions within cycle waves a-b-c are seen in absolutely exactly the same way as primary waves 1-2-3 for the main wave count.

In line with recent Grand Super Cycle wave analysis, I have moved the degree of labelling for the bear wave count all up one degree.

This bear wave count expects a Super Cycle wave (c) to unfold downwards for a few years, and if it is a C wave it may be devastating. It may end well below 666.79.

However, if this wave down is a Super Cycle wave (y), then it may be a time consuming repeat of the last big flat correction with two market crashes within it, equivalent to the DotCom crash and the recent Global Financial Crisis, and it may take another 8-9 years to unfold sideways.

Within the new bear market, no second wave correction may move beyond the start of its first wave above 2,134.72.

TECHNICAL ANALYSIS

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ADX is still above 20 and still just rising, indicating the market is trending and the direction is down.

Volume for Monday is very slightly higher than Friday, but still lower than recent downwards days of 26th June and 6th July. Overall volume, since the last all time high, is still stronger on downward days than upward days, indicating a downwards trend and agreeing with ADX.

Price has broken through the green trend line. The next line of resistance may be the new violet trend line drawn across the last two swing highs.

The shorter EMA remains below the longer EMA indicating the trend is still down.

A note on Dow Theory: for the bear wave count I would wait for Dow Theory to confirm a huge market crash. For that to be confirmed the following new lows are needed:

S&P500: 1,820.66
Nasdaq: 4,116.60
DJT: 7,700.49
DJIA: 15,855.12

At this time DJT is closest, but none of these indices have made new major swing lows yet.

This analysis is published about 06:51 p.m. EST.